Household lending up but outlook unclear

Alex Druce
(Australian Associated Press)

 

Lending to owner-occupiers and investors rose in February, but there’s little agreement among economists about what that means for the health of the housing market.

Some expressed cautious optimism that, after months of declines, markets could be finding a bottom, while others predict the downturn has further to run.

The value of new lending commitments to households rose 2.6 per cent to $32.13 billion in February, according to seasonally adjusted figures released on Tuesday by the Australian Bureau of Statistics, fuelled by a 3.4 per cent monthly rise in the value of lending to owner-occupiers.

ANZ noted it was the first monthly rise since July last year.

The number of approvals excluding refinancing rose 0.8 per cent, beating market consensus of a 0.5 per cent increase.

RateCity research director Sally Tindall said the uptick could be an anomaly or might be evidence that the housing downturn was slowing.

She also pointed to Commonwealth Bank’s decision on Tuesday to cut a range of fixed rate home loans.

“After a year of frugal lending practices, some banks have realised they need to hit a more sustainable medium when it comes to home lending,” Ms Tindall said.

“The banks are hungry to bolster their books through competitive pricing.”

But with the value of total household lending still 15.7 per cent lower than the same time a year ago, others, including ABS chief economist Bruce Hockman, were more cautious about the outlook.

“The longer term story is largely unchanged with new lending to households remaining subdued and well down on levels seen over the past five years,” Mr Hockman said.

Westpac senior economist Matthew Hassan said Tuesday’s update was firmer than expected, but the signs of improvement were still tentative.

“The market may be starting to find a base in terms of finance activity but conditions remain weak overall,” Mr Hassan said.

Meanwhile, a fresh report from CoreLogic-Moody’s Analytics report says the erosion house values across Sydney and Melbourne is set to continue this year.

The March CoreLogic Hedonic Home Value Index results on Tuesday flagged that Sydney prices will tumble a further 9.3 per cent in 2019 after a 5.5 per cent fall last year.

Melbourne prices will fall by 11.4 per cent this year, it says.

Tuesday’s ABS data also showed lending to businesses fell 11.1 per cent during February to $30.59 billion, dragging total business and household lending down by 4.6 per cent to $62.72 billion.

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