The brakes are on for Australia’s property sector with new figures from the Australian Bureau of Statistics showing tyre-screeching falls in lending and approvals.
And according to analysts, the medium-term outlook is darkening as increased building costs and falling property prices lead to a rising number of proposed developments becoming unviable.
The latest ABS Lending Indicators data has revealed the total value of home loans dropped 8.2 per cent in September to $25.1 billion in seasonally adjusted terms in line with expectations.
But owner-occupier lending—excluding refinancing—plunged 9.3 per cent month-on-month to $16.8 billion after a fall of only 2.7 per cent in August.
“This was the steepest monthly decline on record,” BIS Oxford Economics senior economist Maree Kilroy said. “All states and territories saw owner-occupier loans decline, the first time this has happened since early 2020.”
In Queensland, the value of new loans for owner-occupier housing in September fell 13.8 per cent, in Victoria by 10.4 per cent, in NSW by 5.9 per cent, WA by 13.2 per cent, SA by 7 per cent, ACT by 8.9 per cent, NT by 25.2 per cent and Tasmania by 10.4 per cent.
Investor lending slid an overall 6 per cent to $8.33 billion after a fall of 4.3 per cent in August.
Kilroy said with the cash rate expected to be hiked another quarter of a percentage point in December and further lifts likely in 2023 the deterioration in credit availability would continue and drag on demand for new and existing housing to mid-2023.
“We ultimately expect a nationwide all-dwelling median price peak-to-trough fall of 11.5 per cent,” she said.
Housing Industry Association senior economist Nick Ward said the new ABS data provided some “sobering statistics”.
“The Reserve Bank of Australia’s tightening is weighing heavily on demand for housing and the full impact will not emerge until the second half of 2023.”
Ward said the slowing in housing finance data was consistent with other leading indications, including HIA’s New Homes Sales Survey.
“If these trends are sustained, which is expected, then the 2.75 per cent increase in the cash rate so far will have brought this boom to an end.”
According to the latest ABS Building Approvals data, national total approvals for dwellings eased in September, falling 5.8 per cent month-on-month in seasonally adjusted terms to 16,455, following a 23.1 per cent increase in August.
Approvals fell in most states, including South Australia (-19.7 per cent), Tasmania (-10.8 per cent), Western Australia (-9.3 per cent), New South Wales (-8.8 per cent), and Queensland (-6.2 per cent), in seasonally adjusted terms. Total dwelling approvals increased in Victoria (3.4 per cent).
Kilroy said the 7.8 per cent month-on-month seasonally adjusted fall for private sector house approvals to 9628 in September was “worse than expected, breaking the soft growth trend of the prior few months”. It followed a 4.8 per cent increase in August.
Attached home approvals largely held their ground falling a modest 1.8 per cent to 6622, following a 68.3 per cent increase in August.
“Approvals are expected to hold relatively flat to the end of 2022, with support for houses coming from the flow through of a record volume of greenfield land being sold in 2021,” Kilroy said.
“Beyond the sizeable backlog of work already committed, the outlook darkens medium term. It has become increasingly difficult for new projects to gain traction, which will drag on approval volumes in 2023.
“For developers, the significant step up in build costs and slide in property prices is causing an increased volume of proposed projects to become unviable.
“For potential new home buyers, rising interest rates are providing a growing drag on demand. Long wait times and the increased potential for cost overruns are also weighing on buyer confidence.”
But she added that the rise of the build-to-rent sector as well as social and affordable housing could emerge as a potential counter to future declines in approvals.
Ward said there was still a significant volume of work under construction that is sustaining employment across the economy.
“This is helping to keep the unemployment rate at exceptionally low levels,” he said “When this pool of work is completed, the full impact of this rate rising cycle on employment will emerge.
“There is a risk that this volume of work on the ground is obscuring the adverse impact of rising interest rates.
“These treacherous lags that characterise this housing cycle could result in the RBA weighing too heavily on households and businesses and jeopardising the housing industry’s future soft landing. Patience is required to see the full effect of rate increases to date.”
