Australia: Upside surprise in July housing finance approvals - Westpac

Simon Murray, Research Analyst at Westpac, notes that Australian owner occupier housing finance rises 2.9%, while value of investor lending was down by -3.9% in July.

Key Quotes

“Australia housing finance approvals to owner occupiers rose 2.9% in July, an upside surprise to market expectations of 1.0% and Westpac’s 1.5%.” 

“The lift centres on gains in NSW (4.3%) and Vic (4.7%).”

“A further positive is shown in the ex-refinancing number, increasing 4.5% following June’s 2.6% gain.”

“Note that the macro prudential tightening measures introduced in late March and associated increases in rates for investor and 'interest only' loans have likely given indirect support to owner occupier loan activity.”

“Further to that point, the value of investor loans fell 3.9% in July which leaves the annual growth rate flat. A factor is the second round of mortgage rate increases for interest-only loans, though the full effect is likely to continue to be seen in coming months.”

“The drop in the value of investor loans saw the total value of loans fall 0.9%.”

“Looking at the detail, there was evidence that the first home buyer programs are gaining traction, with first home buyers as a share of owner occupier approvals rising to 16.6% from 14.9%.”

“In regards to the loan type for owner occupiers, a lift in construction-related finance approvals of 3.1% suggests a near term increase in non high rise construction, while a 1.9% increase in approvals of purchases for newly built dwellings (which includes settlement of ‘off the plan’ apartment purchases) relates to the wave of high rise apartment completions.”

“Overall, the numbers suggest that financing for owner occupiers mid year was well supported with first home buyers getting more of a foot in to the housing market. In addition, there are emerging signs that the macroprudential measures are slowing investor activity.”