Home lending data mixed, but the trend is good

Posted on 16/05/2007  
Owner-occupier housing finance figures kicked up again in March, continuing a trend that started in February. Funds borrowed by owner occupiers increased by 1.7% on a seasonally adjusted basis to $14.523 billion, after a 0.9% gain in February.


But loans to investors suffered a reversal on February figures – down 5% to $6.292 billion, after investment housing loans rose 9% in February to $6.595 billion. That was the strongest monthly result since November 2003 and almost 15% higher than February 2006, so better things were expected in March. Most analysts put the reversal down to a one-off distortion, given the big upswing in investor commitments in February, which was attributed to the influence of large-scale investment decisions.

Mortgage and Finance Association chief executive Phil Naylor says there seems to be some distortion in the investor sector in the March figures. “Investor lending has been quite strong in the previous two months so although there’s been quite a significant decrease in March, it’s still quite strong for the quarter.”

Naylor says the March figures were also significant in that first home buyers returned to the market. “The research we’ve done indicates there are significant numbers of first home buyers who want to get into the market but have been frustrated by high prices. The increased borrowing in March could be a “now or never” approach.”

First home buyers comprised 18.2% of total lending, up from 17.5% in February.
Total dwelling commitments were down 0.4%, seasonally adjusted, to $20.815 billion, after rising 3.3% in February.

Stronger lending figures in February were accompanied by a surge in building approvals – up 10.6% on a seasonally adjusted basis. But the Housing Industry Association views these figures cautiously. Executive director Simon Tennent says it would take additional healthy building figures in the coming months to signal a recovery in the housing sector. Tennent says the strong rise in February was probably linked to apartment projects finally getting approval after local government delays.

However, since these figures came out, the Reserve Bank has kept interest rates on hold, there have been strong retail sales and record low unemployment figures (4.4%) in April 2007. So although lending figures were a mixed bag after a strong showing in February, the first quarter figures support other signs of life in the housing market, which is rebounding everywhere except WA (and maybe the Gold Coast unit market).


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