Housing Loan Approvals Inching Back

By any measure, Australian housing loans have been hit pretty hard over the last eighteen months. Yet, for the last few months, there have been welcome signs of improvement, with each of the last three months closing the gap on the prior year.

The first chart shows the annual percentage growth in the value of loans, compared to the prior year. We can observe that loans are still underwater compared with a year ago. For the year-ended April 2019, the value of loans was 17.3% lower than a year earlier. But, the chart also shows that the decline bottomed out in January – down 20.3% on the prior year.


So, the total value of loans is down but improving. We find ourselves wondering who is receiving the loans. The chart below – a bit of a favourite – shows that investors are continuing to make tough going of the current market. Regulator and bank lending rules have had a lot to do with that!

Overall, the black line showing total loans is pointing down because of the combined pressures of the investor lending malaise and owner-occupiers feeling the pressure.

But, and it’s a good but for the economy and for the Australian society in general, First Home Buyer loans are up by a modest 1.0% over the last year, with loans averaging AUD3.02 billion per month. 


To go straight to the dashboard and take a closer look at the data, click here.

Taking that further, the proportion of loans going to first home buyers continues to grow. It is great news that first home-buyers are accounting for around 17.5% of loans, and it provides genuine support for the economy. The reason is that it is not households per se that drive new construction, but household formation. Other than immigrants, no one forms more households than newly formed families.


There are factors that play into getting first home-buyers into the market. One of those is house prices. With falling house prices for existing dwellings, we would expect to see lower loans at the entry level. But the final chart below tells an interesting story. The orthodoxy prevailed through to late 2018, when first home buyer average loan prices declined.

Since the end of 2018 however, the average size of loans to newbies has moved back up. To be clear, in April 2019, first home buyer loans averaged $347,788, just below the record set a year ago.

First home buyers are a lot of the reason housing finance has not tanked further in 2019, and they are all of the reason for the turn-around. And if that isn’t a reason for encouraging the kids to leave home, we don’t know what is!


To go straight to the dashboard and take a closer look at the data, click here.