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By Brett Warren

Housing loan approvals continue to fall, expect further declines

We keep track of housing finance approvals as the are a good "leading indicator" of what's ahead for our property markets.

Based on the recent data released by the ABS, housing loan approvals fell 3.4% month on month in August, following a sharp 8.5% fall in July,

Housing Finance Approvals 04 October

As you can see from the see charts, housing loan approvals are off their recent highs, with declines being felt across states.

Housing Finance Approvals By State 04 October

Owner-occupier approvals are still above pre-pandemic levels

Owner-occupier approvals although having peaked in May 2021, are still 40% above pre-pandemic February 2020 levels.

Investor approvals that were subdued prior to the pandemic are still 36% above pre-pandemic levels.

Mr Tapas Strickland, Head of Market Economics at NAB said:

"Owner-occupier loan approvals fell 2.7% month on month and investor approvals fell 4.8% month on month.

On an annual basis, the moderation in loan approvals seen to date has mostly occurred on the owner-occupier side (-15.1 % year on year) with the investor side now starting to show falls (-6.4% year on year)."

Australian Mortgage Rates 04 October

On the other hand, loans for new construction remain relatively flat, though it did rise by 1.4% month on month.

In terms of average loan sizes, this fell 3.5% in August to $609k, though is still 23% higher than that seen in February 2020.

What to expect moving forward?

According to Mr Strickland, "looking forward, loan approvals are expected to fall further as the impact of higher rates continues to be felt, and as housing activity slows. "

Growth In Housing Finance Approvals 04 October

He explained further:

"Loan approvals are clearly trending lower with the year-on-year rate now -12.5%, while the 3m annualized is at -48.8% and the fastest pace of decline since May 2008.

One adjustment that has certainly occurred is to the fixed rate mortgage share which has fallen to just 4.4% of loans from its peak of 46% back in July 2021.

Prior to the pandemic, the fixed rate share was around 15%."

Fixed Rate Share Of Home Loans 04 October

Clearly, the falling housing finance suggests further declines in house prices.

Housing Finance Approvals V House Prices 04 October

Source of charts, data and some commentary- NAB

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.
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