I keep a careful eye on housing finance numbers as they are an important leading indicator to what's ahead for our property markets.
The good news is that owner occupier loan commitments jumped as rate cuts and relaxed mortgage serviceability requirements boosted demand for housing credit even as investor loans retreated.
But the upturn in the market that last month drove Melbourne's strongest property price recovery ever and Sydney property recorded the fastest rebound decades however this it not yet flowing through to new dwelling construction.
Friday's figures showed loans for the purchase of existing homes rose 4.8 per cent from August, while loans for newly constructed dwellings fell 2.9 per cent.
Westpac gave a detailed analysis of thee latest finance figures.
Here's what their report said:
The September housing finance approvals showed a much stronger than expected rise in owner occupier loans but a pull-back in the value of investor loan approvals leaving the total value of approvals broadly in line with expectations.
The number of owner occupier loans surged 3.6% in the month, well above market expectations of a +1.1% gain and a clear signal confirming the market recovery already evident in the auction, price and turnover data.
The number of loan approvals is now up 11.4% from its April low and 0.5%yr.
All figures quoted here and below are ex refi.
The wider picture from the value of loans, which covers investor loans as well, was more mixed.
While the value of owner occupier loans rose 3.2%mth, the value of investor loans declined 4%mth, reversing much of last month's 6.5% surge.
Notably, whereas the value of owner occupier loans is now up 5.6% on a year ago, the value of investor loans is still down 13.6%.
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On a combined basis, the total value of loans was up 1.3%mth, more in line with the consensus expectation going into the release.
All major states recorded gains in the total value of loans, led by a surprisingly strong jump in WA (+9.3%mth, +4.9%yr); a solid rise in Qld (+2.9%mth, +2.8%yr); with more moderate gains in NSW (+1.5%mth, –3.9%yr) and SA (+1.8%mth, +4.7%yr); and Vic a touch slower (+0.3%mth, +2.5%yr).
All states except SA have seen double digit growth since May.
The total value approvals is up on a year ago in all states except NSW.
The number of first home buyer approvals dipped slightly in the month, our estimates pointing to a 1.6% decline but following a this month after an 11.4% jump through July-August, suggesting demand from this segment is consolidating rather than waning.
Construction-related finance approvals continue to show more mixed results, the number of owner occupier finance approvals for construction up just 0.9%mth but still down 4.5%yr but finance for the purchase of newly built dwellings (which includes settlement of 'off the plan' purchases) down 2.9%, retracing some of the 11.1% jump in July-Aug and still down 8.8%yr.
The mix suggests non high rise dwelling approvals should stabilise in coming months but finance activity remains weak in high rise segments.
Overall, the result confirms the clear upturn in activity since mid year is carrying into year end and suggests that rather than the more balanced upturn shown a month ago, the gains are being driven more by owner occupiers than investors.
This is important for the medium term market outlook as it suggests the upturn will be more sensitive to affordability than the previous investor-led cycle.