Coronavirus clouding lending outlook: ANZ

The Australian Bureau of Statistics (ABS) has released its latest Lending Indicators data, reporting a 4.6 per cent increase (seasonally adjusted) in the value of new housing loans approved in January to $20.7 billion.

Most of the improvement came via owner-occupied lending growth, with the value of new owner-occupied loans rising 5 per cent to $15 billion.

This was supported by investor lending growth of 3.6 per cent to $5.7 billion.

This follows the release of the latest property exposure statistics from the Australian Prudential Regulation Authority (APRA), which revealed that the banking sector approved $106.5 billion in new home loans in the three months to December 2019, up 12 per cent on the previous quarter.  

However, the outlook for the sector has begun to shift in light of the coronavirus (COVID-19) outbreak, which has emerged as a threat to the domestic economy.

Reflecting on the ABS data, ANZ Research stated that the outlook for housing finance and residential property prices is “more uncertain now”.

The research group observed that the crisis could hinder demand for housing if labour market conditions deteriorate.

“If COVID-19 pushes up the unemployment rate, this could curb the ability of prospective buyers to take on debt, which would affect mortgage demand,” ANZ Research noted.

The group added that further cuts to the cash rate from the Reserve Bank of Australia (RBA) could help offset downside risks but warned that the housing market would not be immune to the broader economic impact of the COVID-19 outbreak.  

“The recent rate cut in March and the likelihood of a further rate cut in the coming months may offset that risk somewhat,” ANZ Research stated.

“While housing is protected from short-term impacts of COVID-19 (less travel, events), it is not sheltered from its wider economic impacts.”

Other analysts, including AMP chief economist Shane Oliver and CoreLogic head of research Tim Lawless have also flagged downside risk to the housing market from the coronavirus.  

Following the release of CoreLogic’s latest property price index, the analysts warned that an escalation of the crisis could curb the rebound in dwelling values.   

Mr Oliver observed: “A big and rising risk to the property market outlook is now posed by the global coronavirus outbreak.”

“At this stage apart from the possible absence of some Chinese buyers I doubt coronavirus is having much impact on the property market. 

“However, if the situation badly worsens globally and the virus takes hold in Australia then it could become a big short-term negative as the economy slows even further potentially into recession, the loss of share market wealth drags on property demand and if people put off buying property along with other activities for fear of catching the virus.”

[Related: Coronavirus could curb property price growth]