Investor mortgage crash to drive house prices lower

MacroBusiness 12:02 pm on August 8, 2018

Leith van Onselen

Today’s housing finance data for June, released by the Australian Bureau of Statistics (ABS), posted a large fall in overall finance commitments, led by crashing investor demand.

According to the ABS, the total number of owner-occupier finance commitments (excluding refinancings) fell by 0.5% in June in seasonally adjusted terms and was down 5.6% over the year:  The recent rise in FHB mortgage demand has been driven by NSW and VIC, where FHB incentives were implemented from 1 July 2017. FHB commitments were up by 56% and 31% in NSW and VIC respectively relative to June 2017:

Next, the below chart tracks the annual growth in the value of finance commitments, and shows that the trend in owner-occupied finance (excluding refinancings) has only recently fallen whereas investor finance commitments are crashing, with total mortgage growth also falling sharply:

Thus, despite the FHB boost via State Budget stimulus in NSW and VIC, housing finance overall is tanking.

This continues to auger very badly for house prices, particularly given the very strong correlation between investor finance and house price growth:  House prices will keep falling based on this release.