Home lending slightly weaker in May

The election was likely behind a dip in home loan approvals in May, but a worse fall had been expected.

Mortgage lending curbs have been eased. Picture: iStock.

Financing of Australian housing was slightly weaker in May, according to new data, a result that was likely impacted by the approach of a federal election.

The May 18 poll was fought in part on the issue of proposed radical change to the tax treatment of property investment.

Still, today’s result was better than expected, as buyers reacted to talk of coming interest-rate cuts by the Reserve Bank of Australia.

The number of home loan approvals, excluding the refinancing of existing loans, fell a seasonally adjusted 0.1 per cent in May from April, the Bureau of Statistics said.

Economists surveyed ahead of the announcement had expected a 1.0 per cent fall for the month.

The value of loans for investment housing fell 1.7 per cent in May from April, the ABS said.

Since May, there have been signs that a near two-year downturn in house prices looked to be drawing to a close with the major markets of Sydney and Melbourne appearing more stable.

Recent data from property research firm CoreLogic showed house prices nationally fell 0.2 per cent in June from May, but Sydney dwelling prices rose a modest 0.1 per cent in June, the biggest monthly increase since mid-2017. In Melbourne, home prices rose 0.2 per cent in June.

The more solid numbers come as official interest rates were lowered for the first time in nearly three years at the start of June, with a follow-up delivered at the start of July.

Governor of the Reserve Bank of Australia, Philip Lowe, has left open the prospect of a further interest-rate cut “should it be needed.”

Mortgage lending regulations have also been eased in recent months, and property auction sales have improved. Analysts now say the market looks ripe for small price increases.

Still, the outlook does not imply a big market reversal is in the offing, given that weak wages growth and record household debt will continue to constrain consumers’ buying power.

Dow Jones Newswires