Australian Housing Finance Approvals Rebound

Fundamental analysis of Forex market

Owner-occupiers (no.) +4.2%mth, –8.7%yr (f/c 1.5%). Investors (value): +5.3%mth, –20.4%yr. Total (value): +5.1%mth, –11.8%yr (all figs ex-refi).

July housing finance approvals were stronger than expected, the number of owner occupier loans rising 4.2% vs the consensus forecast of a 1.5% gain. Approvals are still down –8.7%yr.

The value of investor loans also posted a strong 5.3% gain in the month, but is still down –20.4%yr.

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The total value of owner occupier and investor loans rose 5.1%mth, –11.8%yr.

While the July data came in above expectations, the surprise relates more to the timing of the lift for the finance data rather than the market upturn itself which more timely indicators show gathered clear momentum in August after having stabilised in June-July. Industry data covering the major banks had pointed to a more modest gain for finance in July suggesting this strength would show through more clearly next month. Instead the gain looks to have come through a month earlier, the solid July rise also suggesting non-majors may be seeing a bigger lift in finance.

All of the major states recorded gains, led by NSW (+5.4%mth, –8.8%yr); Vic (+3.4%mth, –8.9%yr); and Qld +2.8%mth, –13%yr); with smaller gains in SA (+1.4%mth, –5.3%yr) and WA (+0.9%mth, –4.0%yr).

As the volume and value mix suggests, the average loan size rose in the month, the detail showing gains concentrated in NSW and Vic with a notable rise amongst first home buyers. The number of first home buyer approvals also posted a strong rise, our estimates pointing to a 10% gain in the month in seasonally adjusted terms.

Construction-related finance approvals were mixed, finance for construction down 1.6%mth, –14.6%yr – suggesting more downside risks to non high rise dwelling approvals near term – but finance for the purchase of newly built dwellings up strongly, +10.7%mth, –9.8%yr. The latter includes ‘off the plan’ purchases but will also cover those raising finance to purchase recently completed high rise developments. It had been one of the weakest segments up until the July bounce.

Overall, while the July gain was stronger than expected it is broadly consistent with the improvement in auction market activity and prices seen through Jun-Aug. While conditions point to a further rise in August, turnover still looks to be running at low levels. Finance data in the next few months will provide important clues to the composition and strength of the upturn.

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