March’s Gains Lost as Home Loan Values Drop

The value of new loans has slid backwards, dropping in April after a solid rise the previous month.

According to the latest data from the ABS, the value of new loan commitments for housing fell 2.9 per cent to $23.3 billion in April (seasonally adjusted), after a 5.3 per cent rise the previous month.

ABS head of finance statistics Mish Tan said the value of new owner-occupier loan commitments fell 3.8 per cent to $15.4 billion in April, while the value of new investor loan commitments fell 0.9 per cent to $7.9 billion.

The value of new owner-occupier home loan commitments (excluding land and alterations, additions and repairs) fell 3.9 per cent to $14.3 billion.

Meanwhile, the number of these commitments fell just 0.1 per cent.

Compared to pre-pandemic levels from February 2020, the value of new owner-occupier home loan commitments was 10.2 per cent higher in April 2023, while the number of these commitments was 5.3 per cent lower.

The average value of these loans has risen by 21.8 per cent (in original terms) over this period.

The number of new owner-occupier first home buyer loan commitments fell 0.9 per cent, after a rise of 16.5 per cent in March.

This was 16.2 per cent lower compared to a year ago.

The value of new owner-occupier housing loan refinances between lenders fell 8.6 per cent but remained high at $13.0 billion, after reaching a record high of $14.2 billion in March. Borrowers continued to switch lenders amid a high interest rate environment.

The value of total new loan commitments for fixed term personal finance rose 1.5 per cent. Lending for the purchase of road vehicles rose slightly by 0.5 per cent.

The number of properties coming to market has slowed in recent months.

According to PropTrack, nationally, new listings in April decreased 28.3 per cent compared to the previous month.

Compared to last year, new listings were down 23.5 per cent in April.

Oxford Economics Australia senior economist Maree Kilroy said the imbalance between underlying demand and supply has placed a floor under prices.

“New listings have fallen to a decade low, and price growth has returned in markets where households have a greater incidence of purchasing with cash such as the upper quartile of Sydney, Melbourne and Perth,” she said.

▲ Oxford Economics Australia senior economist Maree Kilroy says new listings have fallen to a decade low.

“Whether price growth is sustained over the remainder of 2023 is uncertain.

“The impact of rising interest rates on existing at-risk borrowers is yet to play through, with a wave of fixed-rate mortgages to soon rollover. “This still has the potential to trigger a material lift in pressured sales that can offset the current momentum in property prices in the back half of 2023.”

Canstar finance expert Steve Mickenbecker said the combination of higher interest rates and supply constraints could mean even more potential buyers miss out in today’s strained market.

“The recovery in property prices in capital cities around the country in recent months is largely driven by a shortage of supply, rather than a return to buoyant demand for property.

“Sellers are sitting back waiting for more favourable conditions and that demand is unlikely to come before interest rate cuts become a near certainty. 

“Raising a deposit is still a hurdle to home ownership, made all the more difficult by higher rents and other living costs.

“But affordability of repayments has now become an even greater deterrent and it is going to be quite some time before we see any relief.”

Canstar’s analysis shows the average variable rate for existing borrowers has risen from 2.98 per cent in April 2022 to reach 6.73 per cent after the cash rate rise of May of this year.

This adds about $1133 a month to repayments on a $500,000 loan over 30 years or $2268 on a $1-million loan.