Home-loan commitments fall 15 per cent as property investors retreat
Australia recorded a 15 per cent fall in the number of new home-loan commitments in the September quarter, as a much sharper retreat by investors outweighed a smaller decline among people buying somewhere to live. The seasonally adjusted figures, released on November 11, put the total at 111,878 commitments, excluding refinancing.
The value of those commitments fell 15.5 per cent to A$81.2 billion. Investor commitments dropped 30.6 per cent in number to 35,301 and 32.3 per cent in value to A$24.7 billion. The overall and investor declines were described as record falls. These are measures of new lending, rather than a count of all mortgages already held by households.
Owner-occupiers also borrowed less
New owner-occupier commitments fell 5.3 per cent in both number and value, to 76,578 loans worth A$56.5 billion. Within that group, first-home-buyer commitments fell 8.6 per cent in number to 26,415, while their value fell 8 per cent to A$16.2 billion. The decline in the number of loans to other owner-occupiers was 3.7 per cent.
The figures show why a rising share of lending for people buying a home to live in does not mean that their borrowing increased in absolute terms. Lending fell across the main borrower groups, but investors pulled back much further. The statistics cover commitments for construction, newly built homes and existing dwellings; residential land and alterations are separate series.
Interest rates and tax changes in focus
The housing slowdown began before the May budget, when the federal government announced plans to limit property-investor tax concessions. Conditions have since weakened further, spreading beyond Melbourne and Sydney to other capitals. Five interest-rate increases this year have also raised borrowing costs to their highest level since 2008.
Australian Bureau of Statistics finance-statistics head Mish Tan said investor activity appeared to be influenced by more than higher borrowing costs, including the possible effect of tax changes and expectations of lower house prices. Reserve Bank governor Michele Bullock similarly said investor demand had fallen much further than in previous tightening cycles, suggesting tax changes were also playing a part. Her comments concerned investor demand, not a finding that taxes explained every decline in owner-occupier lending.
Property data provider Cotality put the nationwide fall in house prices at 6.7 per cent from the March peak, the fastest decline in four decades. Auction clearance rates have also weakened. Treasury modelling behind the tax changes envisaged a two-percentage-point reduction in house-price growth, but Treasury says that was a structural estimate rather than a short-term forecast incorporating rate rises. The reported fall has nevertheless been deeper than some within government expected.
Government and critics read the figures differently
Housing Minister Clare O'Neil said the smaller decline for people buying a home to live in showed the balance moving away from investors, which was the intention of the tax changes. She argued that a market geared towards investors for a generation had weakened home ownership and priced out younger Australians. Ministers say they are not targeting a particular house price or seeking price falls for their own sake.
Liberal housing spokesperson Andrew Bragg rejected that interpretation, saying fewer loans across the market reflected lost confidence and would not deliver more homes. Master Builders Australia chief executive Denita Wawn said the result supported the industry's warnings about the budget tax changes. She argued that declining investment in housing was arriving when more supply was needed and warned of further weakness. The disagreement is over the causes and policy consequences of the downturn, not whether the new-lending figures fell.