According to new Lending to Households and Businesses data from the Australian Bureau of Statistics (ABS), the total value of loan commitments to households dropped by 4.4 per cent, when seasonally adjusted, to $32.03 billion in December last year, compared to the 2.4 per cent fall recorded in November.
The main drivers of the overall decline were substantial falls in the value of lending for owner-occupied dwellings and investment dwellings, which decreased by 6.4 per cent to $12.5 billion and by 4.6 per cent to $4.89 billion, respectively, according to ABS chief economist Bruce Hockman.
“The slowdown in lending for investor dwellings this month continues the steady decline over the past two years, with the value of new investor loan commitments down around 40 per cent from the peak at the start of 2017,” the chief economist said.
“The slowdown in lending for owner-occupier dwellings is more recent, with falls concentrated in the last half of 2018.”
The total number of owner-occupied housing commitments (excluding refinancing) went down by 8.2 per cent in December to 32,102, in seasonally adjusted terms, while the number of commitments for first home buyers (owner-occupied) dropped by 9.6 percent to 8,476 the same month.
“While the fall in lending to first home buyers over the past year reflects the broader trend of weaker lending activity, the fall is smaller than the fall in lending to owner-occupier non-first home buyers (-15.5 per cent) and follows strong growth in 2017,” the ABS stated.
Further, total commitments for the construction of dwellings slipped by 2.4 percent to 5,428 in December, while the number of commitments for the purchase of new dwellings slid by 5.5 per cent to 2,431, when seasonally adjusted. The number of commitments for the purchase of established dwellings in the same month similarly fell by 9.7 per cent to 24,242.
On a state-by-state basis, the value of lending for owner-occupied dwellings (excluding refinancing) decreased in NSW (-6.1 per cent), Victoria (-6.6 per cent), Queensland (-9.9 per cent), Western Australia (-6.3 per cent), the ACT (-4.9 per cent), the Northern Territory (-18.3 per cent) and South Australia (-1.0 per cent). Tasmania (+4.2 per cent) was the only state to record an increase in December.
Speaking of the figures, Sally Tindall, research director at RateCity.com.au noted that the December figures were nearly 20 per cent (19.8 per cent) down on the prior year (in seasonally adjusted terms and exclusing refinancing).
She commented: “New lending to owner occupiers fell the most this month, with a 6.4 per cent drop, compared to investors who fell just 4.6 per cent.
“Looking at the bigger picture however, investors are still leading the retreat from the market, with a 27.8 per cent drop in new loans compared to the year before."
Recent CoreLogic data revealed that the value of dwellings had shrunk by 4.8 per cent in 2018 when compared to the previous calendar year, marking the weakest housing market conditions since the global financial crisis.
The property data and analytics company had stated that the “accelerated” “downturn” was driven primarily by consistently larger quarter-on-quarter declines in Sydney and Melbourne, but also sluggish conditions in other capital cities and most regional areas.
Dwelling values fell by 8.9 per cent in Sydney in 2018 and by 1.3 per cent across the rest of NSW, according to CoreLogic. The median price in Sydney at the end of December was $808,494, similar to what it was in August 2016.
Melbourne also saw an annual decline of 7.0 per cent in house prices, with a median value of $646,123 at the end of December. This is close to values seen in February 2017, according to CoreLogic. However, the rest of Victoria saw values rise by 5.9 per cent.
Meanwhile, the value of business lending commitments was also down by 9.7 per cent month on month to $30.68 billion in December, according to ABS data, with total commercial finance commitments decreasing by 9.8 per cent to $30.11 billion, when seasonally adjusted. Total lease finance commitments similarly fell by 5.7 per cent to $568 million in the same month.
However, when compared to December 2017 figures, business lending commitments were up 3.1 per cent.
[Related: House values plunged by 4.8% in 2018]
Tas Bindi is the features editor on the mortgage titles and writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.