• News

Newbie home loans up again but total lending still falling

First Home-Buyers received 13.6% of total dwelling loans (net of refinancing) in August 2018, valued at AUD3.289 billion. Positive though this news is, it is tempered by the knowledge, they are growing their share of a declining housing market. 

The total value of loans over the year-ended August was 3.7% lower than a year earlier and in august, loans were 13.6% lower than in August 2017. 

Owner Occupiers received loans valued at 4.1% more over the year-ended August, while their Investor counter-parts experienced a decline in the value of loans of 12.4%. 

These experiences can be observed in the following chart.

fig18

To go straight to the dashboard and take a closer look at the data, click here.

The chart shows the continual decline in total loans (the green line) and the similar decline in loans to investors (the red line). So the good news about First Home-Buyers has to be tempered with the decline in the total value of loans.

For some, including regulators concerned about levels of household debt to income ratios, the following chart provides little comfort. Household debt to income is now at 191% with housing debt to income running at 141%.

fig19

As Greg Jericho commented in The Guardian:

“The RBA noted that while for the most part the value of a household’s assets was greater than its debt, “for most households, almost all of their wealth is in relatively illiquid assets, such as housing and superannuation.” This makes for difficulty in selling assets to make repayments should the economy turn bad and unemployment rise.”

That is what makes the number of loans issues to households important. As we can see below, the number of loans is falling more rapidly than their value, with loans in October being 10.5% lower than the year before – the lowest level in seven years.

fig20

This reduction in the number of loans and their total value will likely last for the rest of 2018 and most of the first half of 2019. House prices will fall on average, and probably on a quite widespread basis across the country.

In the next chart, we can see that loan approvals for new dwellings (purchase or construction) have followed similar trends. 

fig21

To go straight to the dashboard and take a closer look at the data, click here.

The more stable – starting to get shaky – credit provided to owner-occupiers for construction of new premises, is going to become shakier still. Unlike the other lines, when the blue-line falters, housing starts will be impacted.

 

Posted Date: October 26, 2018

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