First home buyers retreat; Record refinancing

From

Economic and financial market events

  • The value of new home loans to owner-occupiers fell by 3.3 per cent in June, with loans to investors down 6.3 per cent. Refinancing soared almost 10 per cent to a record $12.7 billion in June.
  • The number of first home buyers fell 8 per cent in June to be down 32.2 per cent on a year ago.
  • The number of dwelling approvals fell by 0.7 per cent in June but after an 11.2 per cent increase in May. In the 2021/22 year, approvals were down by 9.4 per cent.
  • The ANZ-Roy Morgan consumer confidence index rose by 2.1 per cent last week to 84.1 points – the biggest rise in five weeks (long-run average since 1990 is 112.0).

What does it all mean?

  • Consumer sentiment continues to closely track the petrol price. Petrol fell by 11.2 cents per litre last week and consumer confidence posted the biggest gain in five weeks. Additionally, the gauge on inflation expectations hit the lowest reading in nine weeks. Interestingly, the lift in confidence occurred in a week when the Consumer Price Index was released.
  • Dwelling approvals – or council approvals to build new homes – is a leading indicator of construction. The problem is that the data bounces from month to month. A rolling annual total smooths out the bumps. And the total of approvals for the year to June was down by 9.4 per cent over the year, the biggest drop in just over two years.
  • There is still plenty of work around but the pipeline of work is slowing, pointing to a better balance between demand and supply later this year and into 2023. This points to a potential alleviation of price pressures in coming months.
  • After only two months of rate hikes, first home buyers are in broad retreat. The number of first home buyers slumped 8 per cent in June and numbers are down more than 32 per cent over the year. First it was soaring home prices impacting on purchase intentions, now it is rising interest rates.
  • A record $12.7 billion of existing home loans were refinanced in June as borrowers scurried to lock in cheaper finance.

What do you need to know?

Lending Indicators – June 2022

  • The value of new home loans fell by 4.4 per cent in June and was down 2 per cent on a year ago.
  • Owner-occupier loans fell by 3.3 per cent and were down 9.6 per cent on a year ago.
  • Investor loans fell by 6.3 per cent in June but were still up 17.3 per cent on a year ago.
  • The value of first-home buyer loans fell by 10 per cent in June and was down by 29 per cent on a year ago. The number of first-home buyer loans fell by 8 per cent in June and was down 32.2 per cent on a year ago.
  • Personal fixed loans slumped by 15.2 per cent in June but were stil up 10.4 per cent on a year ago.
  • Business construction loans rose by 7.7 per cent in June and were up 32.7 per cent on a year ago. Business purchases of property fell by 19.4 per cent in June to be down 11.9 per cent on the year.
  • The value of renovation loans lifted by 11.6 per cent to record highs and were up 42.7 per cent over the year.

Dwelling approvals – June 2022

  • Dwelling approvals fell by 0.7 per cent in June after an 11.2 per cent increase in May.
  • In 2021/22, dwelling approvals totalled 201,306, down 9.4 per cent on the year. In rolling annual terms, dwelling approvals are falling at the fastest rate in over two years.
  • Total dwelling approvals across states in June: NSW (+1.5 per cent); Victoria (+6.3 per cent); Queensland (-2.0 per cent); South Australia (-10.1 per cent); Western Australia (+1.7 per cent); Tasmania (+1.0 per cent).
  • The value of all commercial and residential building approvals fell by 4.7 per cent in June after rising by 10.8 per cent in May. Total residential approvals were down by 3.7 per cent with new residential building down 3.9 per cent and alterations & additions down by 2.2 per cent. And commercial building fell by 6.1 per cent.
  • Over the year to June, building approvals totalled $146.7 billion, up 8.3 per cent on the year.

Consumer sentiment – Week ended July 31

  • The weekly ANZ-Roy Morgan consumer confidence rose by 2.1 per cent last week to 84.1 points (long-run average since 1990 is 112.2). It was the biggest lift in confidence in five weeks.
  • There were increases in four of the five survey questions posed. And the estimate of inflationary expectations fell from 6.0 per cent to a 9-week low of 5.5 per cent.
  • Among the mainland states, confidence improved in Queensland and South Australia, but dropped slightly in NSW, Victoria, and Western Australia.

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