The latest data from the ABS covering housing finance to May 2015, shows that in trend terms (our preferred measure) lending for investment purposes rose by more than 1%, whilst owner occupied loans rose 0.4%. However, this is misleading, because the growth in owner occupied loans is all about refinancing of existing loans which was up by 1.6%, indicating that many are seeking to switch to lower rate deals which are still on offer. Exclude this element, and owner occupied lending actually fell slightly. Total lending overall was $31 billion in the month, a 0.7% rise, whilst in seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions fell 4.4%. Momentum is mainly in existing property rather than new construction.
Looking across the data, we start with the full set, which shows that 52% of all lending was for investment purposes – another record. The total value of lending to owner occupiers and investors for the new home construction eased back by 3.2%, though this is still some 11.5% higher than a year earlier. The decline is attributable to a 5.4% fall in the value of lending among owner occupiers, while lending to investors constructing new dwellings increased by 1.6%.
Refinancing of existing loans amounted to more than 20% of all loans written in the month, reaching a similar proportion to late 2011. We expect refinancing transactions to continue to bloom as investors come off the boil.
First time buyers are still active, in original terms the ABS data showed a rise in owner occupied first time buyer investors. The number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 15.9% in May 2015 from 15.8% in April 2015. However, we also continue to see a rise in investor first time buyers, as they continue to use the “back door” property entry method. Refer to our earlier analysis.
Looking at the state data, we see increases in the ACT and NT, whilst relative changes in the larger states were smaller. WA and TAS are falling a little.
There are nearly as many commitments in VIC than in NSW in the month, whilst WA registered a small relative fall. The number of dwelling construction loans to owner occupiers (in original terms) in May 2015 compared with a year previously was lower in each of the six states: down by 5.9 per cent in New South Wales, down 5.4 per cent in Victoria, down 9.4 per cent in Queensland, down 11.8 per cent in South Australia, down 27.3 per cent in Western Australia and 3.0 per cent lower in Tasmania over the past year.
Finally, of owner occupied loans, refinancing accounted for more than 35%. This is a recent record.
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