ABS Housing finance data shows a further slowdown in March 2010

Housing finance data released this week showed a further slowdown across the sector. 

On a seasonally adjusted basis, owner occupier finance commitments for: construction of new dwellings (-7.3%), purchase of new dwellings (-3.2%), purchase of established dwellings (-2.9%) and total owner occupier loans (-3.4%) all recorded falls during March 2010.  Over the year to March 2010 only commitments for construction of new dwellings has increased, albeit by only a small percentage, 1.6%. Meanwhile, on an annual basis finance for the purchase of new dwellings is down -21.7%, finance for established dwellings is down -26.0% and total owner occupier loans are down -23.3%.

Total owner occupier finance commitments

Total OO fin comit

Source: rpdata.com, ABs

Although total owner occupier loans are down significantly from their levels of 12 months ago, it pales in significance to the falls witnessed specifically across the first home buyer market.  On an original basis, first home buyer loans are -52.7% lower than they were during March 2010, at this time last year first home buyers accounted for 27.4% of all owner occupier loans, this year they make up just 16.1%, their lowest proportion of the owner occupier market since April 2005.

Total owner occupier finance commitments, first home buyers vs non-first home buyers

FHB vs non FHB

Source: rpdata.com, ABS

Whilst owner occupier numbers are clearly softening, which is no surprise given the recent increases in interest rates, the total value of investor finance is gathering pace.  During March 2010 the total value of investor finance increased by 3% to $6.6 billion which was the highest recorded value of finance commitments to investors since February 2008 which coincidentally was the peak of the residential property market prior to the Global Financial Crisis (GFC).  Investor finance commitments accounted for 32.9% of the total value of commitments during March 2010, its highest proportion since February 2005.

Total value of investor finance commitments

Total value of investor finance

Source: rpdata.com, ABS

It’s no real surprise to see investor numbers so strong, typically investors are less susceptible to interest rate hikes than first or second time buyers and investors tend to come in all shapes and sizes.  Whilst opportunities for positively geared investment is becoming much harder to come by, opportunities for investors seeking a negatively geared property are far more abundant now than they were in late 2008 when property prices had softened or during 2009 when interest rates were at 49 year lows.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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