First home buyer unable to sustain market

Photo: Siarhei Baryliuk
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THE surge in first home buyer activity driven by stamp duty discounts in New South Wales and Victoria is beginning to wane, and a significant drop in financing has seen investors account for their lowest proportion of house sales in March since 2012.

The latest housing finance data from the Australian Bureau of Statistics showed seasonally adjusted monthly falls of 1.9% for owner occupiers to $21.01 billion, and 9.0% for investors to $10.88 billion, its biggest fall since September 2015 amid the full force of APRA’s investor lending restrictions.

The weakness in both segments amounted to a 4.8% drop in March to $31.89 billion.

Annual figures showed investor financing was down 16.1%, and the segment now only accounts for 42% of transactions, its lowest level for six years.

“While this result predates APRA’s recent decision to remove the 10% ‘speed limit’ on investor borrowing, it is hard to see a re-acceleration in the investor segment with sentiment clearly subdued,” ANZ senior economist Daniel Gradwell said.

“Having said that, recent announcements from several banks have seen some cuts to investor mortgage rates, which could help ensure such a sharp drop in borrowing is not repeated.”

Owner occupier financing increased by 3.2% over 12 months, and the total figure was down 6.0%.

Gradwell said the fall in housing finance in March is not surprising, given that it was know that March was a weak month for the housing market.

“We will continue to watch developments in the availability of credit very closely. Any further tightening in credit conditions could imply further weakness in the housing market, and would challenge our current view of mild house price growth by the end of the year.”

In its latest Australian Housing Update, ANZ said most of Australia’s residential market slowdown had already occurred. Earlier this year it said the slowdown would bottom out in the first few months of this year, falling to around 1% across the country in the second quarter before ending at 1.9% for 2018, and accelerating again through 2019 to 4.1%.

More recently, NAB downgraded its outlook for national price growth for 2018 from 0.7% to negative 0.8%, on the back of cooling conditions in the Sydney and Melbourne markets. SQM Research followed this week, taking its capital cities growth forecast from between 4% to 8% to a range of negative 2% and an increase of 2%.

AMP Capital chief economist and head of investment strategy, Shane Oliver, said Sydney and Melbourne house prices would fall a further 5% this year.

The latest official data showed financing for new dwellings beginning to trend lower, suggesting that the recent increase in building approvals will soon peter out.

Gradwell said this would not affect the ANZ’s construction outlook given a large backlog of work would still support activity this year.

The number of new dwelling purchase commitments fell by 1.4% in March, and construction of new dwellings by 4.4%. Owner occupied housing commitments was down 2.2% to 53,017, continuing a steady decline since a peak of more than 56,000leading into September last year. The number of purchases of established dwellings was down by 1.9%.

Australian Property Journal