Lending to owner occupiers grows by 3.4% in February as forecaster Moody’s predicts larger-than-expected drop in house values

This article is more than 1 year old

This article is more than 1 year old

Lending to owner-occupiers and investors rose in February but there’s little agreement among economists about what that means for the health of Australia’s housing market – with one forecaster tipping a further 9.3% decline for Sydney property prices in 2019.

Some economists expressed cautious optimism that, after months of declines, markets could be finding a bottom, but CoreLogic-Moody’s Analytics predicts falls in value across Sydney and in Melbourne will be worse than expected.

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Moody’s had said in January that house prices would only fall by 3.3% across Sydney but it now predicts a 9.3% drop. Melbourne values are expected to decline even further – 11.4%, much greater than the 6% predicted in January.

Australian Bureau of Statistics figures released on Tuesday paint a different picture, though, with the steady growth of new lending commitments to households, which rose by 2.6% to $32.13bn in February, fuelled by a 3.4% monthly rise in the value of lending to owner-occupiers. It was the first monthly rise since July last year.

The number of approvals excluding refinancing rose 0.8%, beating market predictions of a 0.5% increase.

RateCity’s 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,” Tindall said. “The banks are hungry to bolster their books through competitive pricing.”

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But with the value of total household lending still 15.7% lower than the same time a year ago, others, including the 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,” he said.

A 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,” he said.

CoreLogic figures show the clearance rate is up slightly to 57.2% versus 50.9% the previous week – it is the third consecutive week where the clearance rate has held above 50%



