Aussie Mortgage Approvals Slide to Lowest in Six Months in July

(Bloomberg) -- Australian home-loan approvals fell in July as buyers stood on the sidelines amid a prolonged election vote-count; the data also showed signs of investors returning to the market after a regulatory-driven slowdown.

Key Points

  • Approvals fell 4.2 percent from June, the biggest monthly decline since January and worse than economists’ 1.5 percent estimate
  • Value of loans to investors rose 0.5 percent from the previous month
  • Loans to owner-occupiers fell 3.1 percent from June, also the biggest fall since January

Big Picture

The Reserve Bank of Australia has been gaining confidence that regulators’ curbs on investment lending are reducing risk and preventing imbalances building up, allowing it to lower interest rates without rekindling a boom in property values. Even so, outgoing Governor Glenn Stevens conceded in an Australian Financial Review interview Friday that he had “discomfort” about Sydney house prices, which have risen 61 percent in the past five years.

Economist Takeaways

  • “While the value of housing finance commitments fell in July, this was entirely driven by owner-occupiers as investor finance continued to rise,” said Daniel Gradwell at Australia & New Zealand Banking Group Ltd. “This is the third month in a row where investor borrowing diverged from owner-occupier lending, suggesting to us that investors are driving the recent pickup in housing demand.”
  • “Today’s report has few implications for monetary policy. At the margin it adds to the evidence that risks in the housing market have abated,” said Tapas Strickland at National Australia Bank Ltd.

Other Details

  • Investment lending rose to 47.6 percent of total loans in July, the largest portion since July 2015
  • By state, the biggest fall in home-loan approvals was 6.5 percent in the Northern Territory; largest increase was 1.4 percent in Tasmania
  • The total value of dwelling finance commitments excluding alterations and additions fell 1.8 percent