The decline in sentiment among investors has trickled into the owner-occupier space, where housing approvals have fallen to the lowest levels in eight years, according to an ANZ analysis of the latest ABS data.
The latest Housing Finance data from the Australian Bureau of Statistics (ABS) has revealed that housing approvals have continued to drop, falling by 1 per cent in September.
The value of housing approvals also dropped, slipping by 3.8 per cent, again driven by a decline in the value of owner-occupied dwelling approvals, which fell by 4.2 per cent in September, while the value of investor approvals dropped by 2.8 per cent.
ANZ senior economist Daniel Gradwell said that while most of the recent drop-off in demand has come from investors off the back of tighter regulation, the data suggests that the “weaker sentiment is now having an impact on the broader market”.
“The value of housing finance commitments fell sharply again in September,” Mr Gradwell said.
“Following some downward revisions to the August results, the value of finance has fallen by 7.5 per cent in the last two months, which is one of the weakest consecutive results on record.”
Mr Gradwell continued: “Owner-occupier approvals are now 11 per cent lower than a year ago, which is the largest decline since 2010.
“While most of the focus around credit tightening has been on investors, the accelerating decline in owner-occupier borrowing suggests that weaker sentiment in the housing market is having an impact on the demand for credit.”
The ANZ economist also noted the decline in the average loan size for owner-occupiers, which he said has fallen to $392,000, down from the peak of $399,000 in May 2018.
However, Mr Gradwell observed that despite the overall drop in lending activity, first home buyer (FHB) market share has “stabilised to solid levels”.
“Over 13 per cent of all lending has been to FHBs in recent months, which is the highest rate since 2012,” Mr Gradwell said.
“The combination of stamp duty discounts and falling prices/improved affordability is likely supporting this segment of the market.”
Reflecting on the ABS data, RateCity research director Sally Tindall said that the decline in lending activity came as a surprise for most industry pundits but noted the opportunities for FHBs.
“This time last year, no one predicted the falls in new lending would be this significant, particularly for owner-occupiers,” Ms Tindall said.
“The housing market was only just coming off the boil and the Hayne royal commission hadn’t yet been announced.
“The good news now is the door is wide open for first home buyers, provided they’ve got a decent deposit saved up.”
Further, CoreLogic research analyst Cameron Kusher said that he doesn’t expect a reversal in the current trend “any time soon”.
“Given the ongoing declines in dwelling values, particularly in Sydney and Melbourne, and the now apparent declines in owner-occupier and investor housing finance commitments, it is hard to see a reversal in dwelling value declines or a lift in sales activity any time soon,” Mr Kusher said.