Investor and home buyer demand drops as housing ‘slowdown’ continues

The latest ABS housing finance figures show falling demand from investors and home buyers.

The latest ABS housing finance figures show falling demand from investors and home buyers. Photo: Getty

Nervousness among homebuyers and investors resulted in a marked drop in the number of property purchases in April, new Australian Bureau of Statistics figures show.

In a development likely to put further downward pressure on house prices, the total value of properties bought with a mortgage – known as ‘dwelling commitments’ – fell 0.8 per cent in April 2018.

The total value of dwelling commitments in April was just over $32 million, the figures, released on Tuesday, showed.

That included a 2 per cent drop in the value of investment properties bought, and a 0.1 per cent drop in the value of owner-occupied properties bought.

It put both investment and owner-occupied monthly dwelling commitments on a clear downward trend, as the graphs below show.

Investment Housing

Source: ABS

Owner-occupied Housing

Source: ABS

There were 52,588 dwelling commitments by owner-occupiers in April, a decline of 1.1 per cent from the previous month.

The housing finance figures reflected a “continued slowdown” in housing markets across most of the country, particularly in the investment sector, the Australian Housing and Urban Research Institute’s Curtin Research Centre director Steven Rowley said.

The drop in demand showed investors and home buyers had adopted a more cautious attitude towards the housing market, he said.

“Market falls tend to mean potential investors, and owner-occupiers, to a lesser extent, enter a ‘wait and see’ mode, which further reduces demand for housing finance.”

Perhaps more concerning, though, is a sharp decline in lending for new construction projects, he said.

The number of commitments for the construction of new dwellings fell 1.7 per cent in April, compared to 1 per cent for established dwellings, and 0.9 per cent for new dwellings.

“The most worrying trend is the steep fall in finance commitments for new construction, which has knock-on effects for the broader economy,” Dr Rowley said.

On a more positive note, first-home buyers increased their share of the market, with the number of first-home buyer commitments as a percentage of total owner-occupied housing finance commitments rising to 17.6 per cent in April, a modest increase from 17.4 per cent in March.

That’s up from a recent low of 12.9 per cent in October 2015, but down on a recent high of 31.4 per cent in May 2009.

Australia’s collective mortgage debt soars

As of the end of April, Australians owed banks and other lenders a grand total of $1.66 trillion in mortgage debt, the ABS figures showed.

Of that, $1.02 trillion – less than two-thirds – belonged to owner-occupiers. The rest belonged to investors.

The vast majority was owed to banks, as opposed to non-bank lenders.

To put that figure in context, the Australian federal, state and local government collectively owe lenders a total of $800 billion – that is, approximately half as much as Australian mortgage borrowers.

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