The total value of housing finance commitments in September 2017 was $32.5 billion according to new data from the Australian Bureau of Statistics (ABS).  The $32.5 billion was the lowest value of monthly housing finance commitments since April of this year and was -3.6% lower over the month which was its largest monthly fall since January 2016.  The decline in the value of commitments occurred across both owner occupier and investment commitments however, the fall in investment commitments was much greater.


The split between owner occupier and investment housing finance commitments shows that over the month there was $20.7 billion worth of commitments to owner occupiers and $11.8 billion for investors.  The value of owner occupier commitments fell by -2.1% over the month to its lowest value since April 2016.  The $11.8 billion in investor commitments was -6.2% lower over the month which was the largest monthly fall since September 2015 and the total value was the lowest it has been since May 2016.


The $20.7 billion in owner occupier housing finance commitments consisted of $2.0 billion for construction of dwellings, $1.2 billion for purchase of new dwellings, $5.9 billion for refinancing of established dwellings and $11.5 billion for purchase of other established dwellings.  Purchase of new dwellings was the only category of owner occupier lending to record an increase over the month.  In fact the -4.6% fall in the value of commitments for construction of dwellings was the largest fall since May 2015.  


Investors committed to $11.8 billion in housing finance commitments in September 2017 split between $1.0 billion for construction of dwellings and $10.8 billion for purchase of established dwellings.  Both segments of investor lending fell over the month with construction down -3.0% and established dwelling commitments -6.4% lower.  In fact the $10.8 billion in commitments for purchase of established dwellings was the lowest value since June 2016.


Looking specifically at lending to owner occupiers, there has been an upswing in lending to first home buyers over recent months.  This has been specifically linked to the fact that in NSW and Vic state governments have removed stamp duty for first home buyers purchasing under certain price thresholds.  In September 2017, the number of owner occupier first home buyer commitments actually fell in all states and territories except for Tas, NT and ACT.  Although the number of first home buyer commitments fell in most states when you look at first home buyers as a proportion of all owner occupier commitments they increased their participation in most states and territories with Qld and WA the exceptions.  Since the beginning of July 2017 when stamp duty concessions went live in NSW and Vic the number of commitments was 57% higher in September than in June in NSW and 27% higher in Vic.  In terms of the proportion of first home buyers they have lifted from 8.8% and 14.4% in June across NSW and Vic to 13.7% and 18.5% respectively in September.

The housing finance data is pointing towards ongoing weakness in investor housing demand as they are impacted by rationed availability of credit and higher mortgage rates.  The slowdown appears to be most significantly impacting the Sydney housing market where investment has been heavily concentrated.  Owner occupier demand has also slowed a little over the month nationally but is holding firmer than investor demand.  As investor activity in the market has slowed and incentives for first home buyers have become available in the two largest states, first home buyers have filled some, but not all of the void.  Over the coming months it is reasonable to expect that there will be further weakness in housing finance commitments as growth in dwelling values continues to slow and credit conditions remain tight, resulting in lower demand for new mortgages.