The impact of consecutive interest rate rises has caused owner-occupiers and investors to shy away from the property sector, with the value of new loan commitments falling 8.5 per cent in July.
Data released by the Australian Bureau of Statistics (ABS) today showed the value of new loan commitments for housing dropped to $28.4 billion in July (seasonally adjusted), following a 4.4 per cent drop in June.
The value of new owner-occupier loans declined 7 per cent nationally to $19.1 billion.
There were falls in all states and territories except for the Northern Territory, which recorded a small gain of 3.1 per cent.
The largest drop was in South Australia, where the value of new owner-occupier loans fell 10.1 per cent to $1.1 billion.
This was followed by Queensland, which recorded a 9.6 per cent fall, Western Australia (down 7.2 per cent) and Victoria (down 6 per cent).
The Real Estate Institute of Australia (REIA) President Hayden Groves said the figures showed that both owner-occupiers and investors were pulling back in the property sector as interest rate rises and the high costs associated with buying hinder the market.
“The value of new owner-occupier loan commitments fell 7 per cent in July 2022, while new investor loan commitments fell 11.2 per cent,” he said.
Mr Groves said rising inflation and housing affordability had become key issues, adding that state and federal governments needed to prioritise this before the situation worsens.
“The ABS figures coincide with CoreLogic’s latest data, which shows their home value index dropped 1.6 per cent in August, the biggest national monthly decline since 1983.”
Mr Groves said property ownership and investment has become increasingly challenging for many Australians.
Housing Industry Association (HIA) Economist Tom Devitt said the data provided sobering statistics on housing finance commitments.
“The rise in the cost of borrowing is compounding the impact of the rapid increase in the cost of building a new home that occurred due to the constraints on global supply chains,” Mr Devitt said.
“Declines were seen across all segments of the market, led by investors.
“The value of loans to investors fell by 11.2 per cent to their weakest month in over a year.
“This was followed by a 9.5 per cent decline for first home buyers, to their lowest level in over two years, and a 6.3 per cent decline for other owner-occupiers.
“There was also a 3.3 per cent decline in lending for renovations.”
Mr Devitt said new home sales across Australia dropped 13.1 per cent in July, following earlier reports of slowing numbers through display sites.
He said this would translate to weaker sales volumes in the second half of 2022.
“If these trends are sustained, which is expected, then the 1.75 per cent increase in the cash rate so far will have brought this pandemic building boom to an end,” Mr Devitt said.
“There remains a significant volume of work under construction and approved, but not yet commenced, that will provide a buffer for the industry and ensure building activity and demand for skilled trades remains exceptionally strong through the rest of 2022 and into 2023.
“There is a risk that this volume of ongoing work will obscure the adverse impact of rising interest rates.”
ABS Head of Finance and Wealth Katherine Keenan said while the value of new owner-occupier and investor loan commitments fell, they remained much higher than pre-pandemic levels.
“Owner-occupier loans in July 2022 were 40 per cent higher than February 2020, while investor loans were 78 per cent higher,” she said.