Housing demand slowing, but no bubbles bursting


It’s going to burst! Property heading for disaster! We’ve all seen the headlines, they make great click bait and generally creates panic for everyone, home owner and mortgage lender alike. But let’s take a step back and look at some facts, they make the world go round and they paint a varying picture than many headlines.

Yes owner occupier lending declined 3.9% in January, more than reversing a 2.7% increase in December. The number of loans extended has flat lined, although new lending remains at a relatively high level per month. OK so what does that translate to? It looks like lender is declining but it also means that new home owners are still applying for loans at a steady and relatively high level.

Now, here is where it gets a bit sticky: The value of home loans for investors declined 1.6% in January, and has declined in seven out of the last nine months. While the breakdown between owner occupiers and investors may continue to be distorted by reclassifications, the value of total loans declined 3.4% in January. The annual pace eased to 2.7%, the weakest in 3½ years. So while this means that softer loan growth might be signalling further moderation in housing demand nonetheless, home lending remains at an elevated level and is suggesting that demand for housing remains healthy.

In terms of annual growth, loan growth in NSW continued to be the strongest with Victoria a close second. There was moderate annual growth in the ACT, QLD and softer growth in SA and the NT. Loans in WA and Tasmania declined in the year to January.

A moderation in home lending sits with the view of softening housing conditions this year. Low interest rates and an improving labour market will continue to underpin demand.

It’s important to understand that new data is always coming in. A clearer picture should emerge once the data starts to come in the traditionally quieter summer months.

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