• 24/07/2024

Upswing in Australian housing finance approvals continues in September

James Foster| Macro View| 7 November 2019


The upswing in Australian housing finance owner-occupier approvals continued at pace in September rising by a sharp 3.6% on the month. On aggregate, the value of lending commitments is now expanding in annual terms for the first time in nearly 2 years. Today’s report was further confirmation of the notable shift in sentiment that has occurred since mid year. 

Housing Finance — September | By the numbers

  • Housing finance approvals to owner-occupiers (excluding refinancing) surged by 3.6% in September to 34,410, whereas markets had only anticipated a rise of 1.0% (prior rev 1.9% from +0.7%). In annual terms, growth swung from -4.6% to +0.5% to be in positive territory for the first time since January 2018.
  • The total value of housing finance commitments (excluding refinancing) posted a 1.3% rise in the month to $A18.93bn (prior rev +4.2% from +2.9%) with annual growth improving from -4.3% to +0.1%, turning positive for the first time since November 2017.  

Housing Finance — September | The details 
The 1.3% rise in the value of lending commitments in September was driven by the owner-occupier segment, which lifted by 3.2% to $14.24bn (excluding refinancing), while the investor segment saw a 4% contraction in the month to $4.69bn.

Activity in both segments hit a turning point over Q3, with commitments up by 10.6% to owner-occupiers and 7.4% to investors. For owner-occupiers, this was the strongest quarter since Q3 2015, while investor commitments on a quarterly basis expanded at their fastest going back to Q4 2016. The last occasion where both segments posted quarterly gains was Q1 2017. 

   In annual terms, growth in total lending commitments is in positive territory, albeit only just at +0.1%, for the first time since November 2017. This is quite a remarkable turnaround given the most recent trough of -21.6% was reached just 4 months ago. Leading the way has been the owner-occupier segment, which is now running at a 5.6% annual pace — its fastest since February 2018 — from a trough of -18.8% over the year to May 2019. The investor segment is still heavily negative at -13.6% but is well off the trough of around -30% in mid-2019. 

The pick-up in owner-occupier activity has been broad-based across the states, with approvals up in September and over the quarter: New South Wales +1.5%m/m (+8.0%q/q), Victoria +2.4%m/m (+6.0%q/q), Queensland +3.3%m/m (+7.6%q/q), South Australia +0.7%m/m (+4.0%q/q), Western Australia +6.1%m/m (+6.4%q/q) and Tasmania +8.7%m/m (+4.7%q/q). 

As the next charts show, approvals to both ‘upgraders’ and first home buyers are generally on the rise across each of the states.

The complete summation of state-based details in September is provided in the table, below. 

Housing Finance — September | Insights
Today’s update was much stronger than anticipated with housing finance approvals continuing to gather momentum towards the end of the year. Owner-occupiers are predominantly driving the turnaround, though the investor segment appears to be moving off its lows from mid year. Key is that sentiment has improved sharply since May’s federal election, the recommencement of the RBA’s easing cycle and a softening in APRA’s guidance around credit assessment criteria. 

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