Small it may be, but February’s rise in the value of housing finance is very welcome news. It may be too soon, but with the total value of loans up 2.7% on January’s low, it is conceivable that housing finance has turned the corner. Feeding into total loan growth, all major groups saw the value of loans increase, and annualized declines also appeared to turn the corner.
As this first chart shows, total housing finance (the green line) had been in decline for most of the last two years. At AUD17.642 billion in February, total loans were AUD470.5 million higher than in January. This was supported by 3.4% growth in loans to Owner-Occupiers (AUD12.908 billion) and 0.9% growth in loans to Investors (AUD4.735 billion).
Within the Owner-Occupier category (mainly), loans to First Home Buyers were up 3.6% for the month, reaching AUD3.004 billion.
On an annualized basis, loans to new borrowers are the sole bright spot. Over the year-ended February, the value of their loans rose to AUD37.374 billion, up 6.6% on the prior year. The total value of loans was down 12.7% over the full year, with Owner-Occupiers down 6.7% and Investors down a withering 24.9% on a year earlier.
The chart below shows the constant improvements in the role of First Home Buyers in Australia’s housing finance data. The red line shows their share of total housing finance. In February 2019, it was 17.0%, its highest level since August 2012!
In terms of total loan numbers, First Home Buyers wrote 8,730 loans, of a total 32,288 loans, accounting for 27% of total loan contracts for the month. This is shown in the chart below, along with the average value of loans to Owner-Occupiers and to First Home-Buyers.
Although still below its peak, the average value of loans to First Home Buyers has risen over the last few months, reaching $344,103 in February, while for Owner-Occupiers, the average value rose to $400,433.
It is relevant to examine what loans are being put to. As the final chart shows, over the last year, the value of loans for Owner-Occupier (including First Home Buyers) purchases of established dwellings fell 8.4%, but for their construction of new dwellings, fell a softer 6.9%.
The value of Investor loans for construction of new dwellings fell 13.5% over the year, underscoring both the more discretionary nature of this expenditure and the lending pressures with which investors have been confronted over the last year and more.
However, as the chart shows, the value of loans were in general higher than two years ago and definitely higher than three years back.
Not out of the woods yet perhaps, but the gentle turn up in dwelling finance is good news.
