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First home buyers coming back to the market while investor lending and housing starts are cooling

The ABS released Housing Finance data and Building Activity data yesterday showing investor lending and housing starts are cooling while first home buyers are coming back onto the market.

REIA President Malcolm Gunning said the proportion of first home buyers, as part of the total owner-occupied housing finance commitments, rose to 17.2 per cent and is the highest proportion since July 2013.

“The number of first home buyer commitments increased by 14.0 per cent for the month and is the highest since December 2009,” Mr Gunning said.

“By contrast, the value of investment housing commitments decreased by 0.2 per cent in August in trend terms following falls in the previous three months and is well down from its 2015 peak,” he said.

“Overall the figures for August 2017 show, in trend terms that the number of owner-occupied finance commitments increased by 1.0 per cent.

“If refinancing is excluded, in trend terms, the number of owner-occupied finance commitments increased by 1.3 per cent and is the eleventh consecutive month of increases.”

“In trend terms increases were recorded in all states and territories except South Australia and the Northern Territory. The Australian Capital Territory had the largest increase of 2.0 per cent, in Victoria and New South Wales where new incentives for first home buyers came into the effect on 1 July 2017, the increases in owner occupied housing commitments was 1.4 per cent and 1.3 per cent respectively. The Northern Territory had the largest fall at 1.4 per cent.

“In trend terms, the number of established dwellings purchase commitments increased by 0.9 per cent while new dwelling construction increased by 1.5 per cent and the purchase of new dwellings rose by 2.1 per cent.

“It is pleasing to see that of the 1,526 increase in loans in August, 1,264, or 82.8 per cent, were to first home buyers. The figures show that the market is adjusting to more stable conditions with owner occupiers and first home buyers returning to the market,” Mr Gunning concluded.

Photo: Malcolm Gunning, REIA President

HIA senior economist Shane Garrett analysed the ABS data and said constraints on lending to investors are compounding a slowdown in building activity and could lead to worsening affordability.

“New dwellings starts are now 8.0 per cent lower than this time last year. This slowdown is further highlighted in finance data which show that the volume of loans for new dwellings fell by 1.2 per cent in August.

“Construction of new dwellings has been in decline for more than a year and it is the apartment side of the market that is leading the downturn. Apartment building has been impacted by a number of foreign investor penalties that have spread across the states.

Mr Garrett said the data shows APRA restrictions on domestic investors are starting to bite – housing investor lending was down 0.4 per cent over the three months to August 2017.

“Our worry is that rental markets could end up being starved of the supply they need, resulting in accommodation shortages locally. Activity in the sector remains high despite the slowdown. “Governments should be cautious in considering further constraints on the sector,” cautioned Mr Garrett.

Housing Finance data indicate that the number of owner-occupier for new housing fell by 1.2 per cent during August 2017. This was driven by a 2.4 per cent reduction in loans for the construction of new dwellings. The number of loans for the purchase of new dwellings by owner occupiers actually rose by 1.5 per cent during August 2017.

During the June 2017 quarter, the changes in new dwelling starts by state (seasonally adjusted) were:
  • New South Wales: down 0.3 per cent
  • Victoria: down 5.4 per cent
  • Queensland: down 16.5 per cent
  • South Australia: up 3.8 per cent
  • Western Australia: down 21.4 per cent
  • Tasmania: up 7.6 per cent
  • Northern Territory: down 28.3 per cent
  • ACT: down 22.4 per cent

HIA Housing Starts press release
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Azal Khan

Azal Khan is the in-house features writer for Elite Agent Magazine.