Loan totals down $1.8 billion from last year
Home lending recovered modestly over May, but is expected to decline over the coming months, according to a My Housing Market May home loan report.
ABS figures show the value of new loan commitments for housing (includes land, alterations and additions) rose 1.7% in May compared to April.
The My Housing Market report, which focuses on housing loans, shows national home loans were $35.9 billion in May 2022, down from $37.7 billion in May 2021.
My Housing Market chief economist and Bluestone Home Loans consultant economist Dr Andrew Wilson (pictured) said all buyer types reported revivals in home lending over May with loans for new housing recording a sharp monthly increase, although still well below the levels recorded a year ago.
“The national market share for buyer types has stabilised over the past year, with owner occupiers, investors and first-home buyers all now approaching long-term average market share levels,” Wilson said. “Home loan refinancing continues to increase, higher over May for the fourth consecutive month, and reflecting the clear outlook for higher interest rates. The total home loan market share of refinancing also remains at predictably elevated levels.”
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According to the report, first home buyer loans (seasonally adjusted) increased by 3.4% over May to $5 billion but were sharply down 27% on the same year-to-date comparisons.
Owner-occupier lending was up 1.7% over May to $19.7 billion, but down 4% in the year-to-date.
Lending to investors was up 0.9% over the month to $11.2 billion, and up 48% in the year-to-date, the report said.
Share of lending by state
At 40%, NSW had the highest share of investor lending over May, but the lowest share of owner-occupied lending, at 60%, and the lowest share of first home buyer lending, at 12.2%.
The Northern Territory had the highest percentage share of owner-occupier lending at 74.8%, followed by Western Australia at 70.5%. NT also had the highest share of first home buyer lending at 24.3%, followed by WA at 21.9%.
In May compared to April, Tasmania recorded the sharpest increase in seasonally adjusted home loans, up 7.4%, followed by Victoria up 5%, and NSW up 1.4%.
Increases in investor lending by state
Most states reported increases in the value of lending to investors over May, with Tasmania recording the highest increase, up 23.6%, followed by South Australia and WA, each higher by 3.9%.
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National average loan values for owner occupiers and first-home buyers were higher over May compared to the previous month, Wilson said.
The annual rate of growth in loan values was again lower for owner-occupiers and investors in May compared to the annual growth results recorded for April. However, for investors, annual growth rates were steady, he said.
Wilson said he expected home loan affordability to be further impacted by the June cash rate rise, and further rises ahead.
“Although home lending rebounded modestly over May and current levels remain close to record results, activity can be expected to decline over coming months reflecting higher interest rates, fragile market confidence and the usual seasonal impact of the quieter winter selling season,” Wilson said.
Although he expected confidence to be undermined by rising interest rates, Wilson said the national economy remained strong with record low unemployment, rising wages, strong household savings and the “wealth effect” of recent significant house price growth.
These factors, together with the 3% repayment buffer imposed by lenders on new borrowers, would all act to offset higher rates, he said.
“Housing markets also generally remain undersupplied with demand set to be bolstered by the resumption of migration and new policies designed to assist first home buyers,” Wilson said.
Asked about My Housing Market’s outlook for annual house price growth in 2022, Wilson said he expected the main capital cities to grow by 1%. In Sydney and Melbourne, he expected price falls of around 6%, and in Brisbane and Adelaide, price rises of 12%. Perth prices were expected to grow by 9%.
