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Tuesday, 12 June 2018

Housing finance softer again in April

Investors squeezed

Total trend housing finance continued to soften in April 2018, down from $33.2 billion at the market peak in January 2017 to $32.1 billion, a total decline of 3.2 per cent. 

Total home lending is at the lowest level in around 1½ years. 

There's no doubting the drivers of this. 

Back in the first half of CY2015 the monthly trend for investment loans was temporarily tracking above $14 billion per month.

But the squeeze is now on, with that figure now down to $11 billion...and falling.


One interesting point of note is that lenders are quietly taking the brakes off for the upgrader cohort, with the derived average loan size for non-first homebuyers rising to $410,400 in April, comfortably the highest level on record. 

So for those homebuyers still borrowing, loan sizes are up and away. 


Furthermore, first homebuyer incentives are drawing first-timers in.

April is typically a seasonally soft month for market activity, but the annual number of loans written to first homebuyers is up by 63 per cent year-on-year in New South Wales and 29 per cent year-on-year in Victoria (albeit from depressed levels in Sydney's case). 


Finally for today, almost all indicators for residential construction are pointing to a significant slowdown in the second half of 2018. 


As detailed in our free Requiem for a Construction Bubble report, the construction sector is at its most bloated level in approximately a century, and we see this as the greatest risk for the economic outlook.

The timeliest indicators suggest a further deterioration in lending volumes likely took place in May and June. 

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The state level housing finance figures are covered in more detail in our monthly subscription reports.