The latest ABS figures show the number of loans for housing is on the downward spiral, according to industry body REIA.

The slide is due mostly to banks moving abruptly away from the property market thanks to stringent APRA regulations and the pending fallout from the Royal Commission.

In September, the total value of new finance commitments for housing (excluding refinancing) $29.9 billion in trend terms - 1.1 per cent lower than the previous month, and 10 per cent below September 2017.

The trend data reveals that while the value of new finance commitments declined, the rate of decline has eased from -1.3 per cent in August.

Most of the decline (70 per cent) was driven by a reduction in the value of owner-occupied loans, which fell $235 million over September.

As the availability of credit for housing is generally a strong indicator for house prices changes, it's possible the December results may reveal further price falls.

REIA President Malcolm Gunning says the results imply the market is in bad shape, and the resulting lack of confidence will have knock-on effects.

“There is no bright spot in the latest figures with the continued decline in housing finance reflecting the slowing market, APRA restrictions which with hindsight were probably excessive, the fallout from the Royal Commission into Banking and concerns about changes to property taxation and its impact should there be a change in Government," Mr Gunning said.

“Government and regulators should be very mindful of the impact that a lack of confidence in the housing market can have on the economy."

The downturn in home lending activity over the month has taken the number of loans to owner-occupiers to its lowest level since 2013, according to Mr Gunning.

“The value of investment housing commitments decreased by 0.9 per cent in September, in trend terms. The dollar amount approved for the purchase of dwellings by individuals for rent or resale is at the lowest level since July 2013 when prices were much lower.”

Mr Gunning said in trend terms, the number of established dwellings purchase commitments decreased by 0.4 per cent while the purchase of new dwellings decreased by 1.7 per cent and new dwelling construction fell by 1.0 per cent.

“Whilst the proportion of first home buyers, as part of the total owner-occupied housing finance commitments, increased in September to 18.0 per cent, up from 17.8 per cent in the previous month. However, the number of loans to first home buyers decreased by 8.8 per cent."

But HIA acting principal economist Geordan Murray says the market looks far more appealing for first home buyers than it has for many years.

"As home prices fall, the purchasing power of first home buyers savings is increasing. This is a marked change from conditions over the last few years where their purchasing power had been diminishing as home price growth outpaced their capacity to save," Mr Murray told WILLIAMS MEDIA.

"With regard to timing the market, first home buyers are just like other would-be home buyers in that they are rightfully concerned that home prices may fall further, indeed further falls in the Sydney and Melbourne markets are forecast by most market analysts. The urgency to get into the market has dissipated right across the various market segments and we shouldn’t expect the behaviour of first home buyers to be any different.

geordan_murray_005.jpg

"This isn’t to say that everyone will be best served by standing on the sidelines. Sellers are also aware of the change in market conditions and will be adjusting their expectations. There will be good deals for first home buyers.

Mr Murray says the September figures show a continuation of the recent downward trend in housing finance.

"The September figures show a continuation of the recent downward trend in housing finance. The decline in lending now appears to be broadening beyond investors with lending to owner-occupiers also starting to ease also. As home prices have eased buyers and sellers have been behaving more cautiously and transaction numbers have declined. These are normal things to see during this phase of the cycle," Mr Murray told WILLIAMS MEDIA.

"The role that APRA’s interventions in the mortgage market are having is a unique aspect of this cycle. The tighter lending environment is an additional contributing factor to the softer housing finance figures. APRA’s measures are untested in a market downturn and the effect needs to monitored closely.

"The housing price cycle still has time to run and throughout the phase where prices are easing we should expect to see fewer property transactions and soft housing finance numbers."

Managing director of Propertyology, Simon Pressley, says the September figures are a big concern. 

simon_pressley_propertyology.jpg

"Credit tightening began in May 2015 and was initially aimed at property investors. Now everyone is affected. The latest housing finance data is something that 25 million Australians ought to be concerned about. Whether a first home buyer, renovator, upgrader, downsizer, or investor, APRA has made it harder for every Australian to make important life decisions,” Mr Pressley told WILLIAMS MEDIA.

Mr Pressley says APRA is to blame for the state of the economy. 

“All around the world, Australia is held up as a poster-child for prudent lending. Our home loan arrears, mortgage defaults and bankruptcies are incredibly low. We’ve always had very prudent lending standards. APRA’s decision to tighten credit makes no sense. They have gone way too far and are now starting to choke the Australian economy."

Mr Pressley is calling on the government to intervene.

“The latest housing data is a much broader issue than Sydney and Melbourne. Property transaction volumes have declined in 7 out of 8 states. Only Tasmania saw an increase.  Scott Morrison and Josh  Frydenberg need to intervene pronto."

Related reading:

Industry body calls for holistic approach to property taxation

Latest CPI figures spells "good news for home buyers and renters" says industry body

Housing finance numbers confirm market feedback, says REIA