ABS lending indicators show fall-off in new housing loans for May

Demand in Australia’s housing market could be easing off, with a shock fall in new lending commitments.

Demand in Australia’s ultra-tight housing market could finally be falling after years of sustained pressure, with new loan commitments for housing declining in May.

The value of new loans dropped 1.7 per cent to $28.8bn, the Australian Bureau of Statistics reported on Monday, with first-home buyers loans leading the fall with a 2.9 per cent decline to $5.2bn.

The value of new investor loans fell 1.3 per cent in May to $10.7bn, while owner-occupier loans, excluding first home buyers, fell 1.6 per cent to $12.9bn.

ABS head of finance statistics Fiona Cotsell said loan commitments were still up over the past 12 months.

“Despite the falls seen across all types of buyers in May, the value of new home loan commitments has still risen 18 per cent over the past 12 months,” she said.

“Loans to investors have continued to see stronger growth than owner-occupiers over this period.”

The value of new loan commitments fell in May according to new lending data from the ABS. Picture: NewsWire / Sharon Smith

And while the national figures are down, Oxford Economics Australia senior economist Maree Kilroy said the numbers showed a split in the country’s housing market, with some states rising across the month.

“The bifurcation of the property markets continues to play out,” she said.

“Perth is running hot, while at the other end of the spectrum is a languishing Melbourne market.”

Western Australia and Queensland bucked the national result, with total lending up 4 per cent and 2 per cent month-on-month, respectively.

“At the national level, we expect price momentum to temporarily fade in the back half of 2024,” Ms Kilroy added.

“Interest rate cuts from early 2025, compounded by a sustained housing shortage, are set to trigger an acceleration in price growth thereafter.

“However, housing affordability will place a limit of on gains.”

The number of loans for first-home buyers fell 3.3 per cent nationwide to 9873, with every state and territory also recording a fall.

NSW tumbled 7.9 per cent, Victoria and Queensland fell 3.2 per cent, WA declined 2.1, South Australia fell 2 per cent, Tasmania slumped 5.1 per cent and the ACT slipped 1.3 per cent.

The average loan size for owner-occupier dwellings remained relatively flat from April to May to hit $626,000 nationwide. Picture: NCA NewsWire / David Crosling

The Northern Territory fell sharply, tumbling 22.5 per cent.

The cash rate sits at 4.35 per cent after the Reserve Bank of Australia pursued an aggressive tightening cycle from May 2022 to November 2023 to tame growing inflation pressures.

The successive interest rate rises, which pushed the rate upwards from 0.1 per cent, has not yet led to slump in housing demand.

The average loan size for owner-occupier dwellings was $626,000 in May nationwide, flat from the $625,000 recorded in May.

In NSW, average loan size hit $767,000, while in Victoria it is $601,000, from $608,000 in April.

Lending in personal finance also fell 0.7 per cent in May to $2.6bn, but was still 12.7 per cent higher compared to a year ago.

Lending for the purchase of road vehicles rose 0.8 per cent in the month, the ABS said.

The value of business construction loans jumped 38.6 per cent in May and rose 1 per cent in trend terms.

The May fall-off contrasts sharply with April, which registered a 4.8 per cent jump in the value of new loans for housing.

First homebuyer loans rose 3.4 per cent to $5.4bn in the month.

Originally published as ABS lending indicators show fall-off in new housing loans for May