Owner-occupier demand cools over 2022 as investors lift

According to the Reserve Bank of Australia’s (RBA) figures, the annual growth rate for housing credit demand dropped from 8 per cent to 7.7 per cent between December 2021 and June 2022. 

This freeze was also observed in the central bank’s three-month annualised figures, with demand sliding from 7.8 per cent in March to 7.6 per cent in June. 

Driving this downward momentum was a slowing of owner-occupier demand, which fell from 9.2 per cent annually in December to 8 per cent in June. 

Between March and June, this drop was a fall of 8.3 per cent to 7.6 per cent. 

“Owner-occupier credit growth has moderated over recent months, while investor credit growth has remained steady after picking up over 2021,” the RBA noted in its report. 

As referenced, investor credit demand increased over this same period, boosting from 5.6 per cent to 7.2 per cent between December 2021 and June 2022. 

The RBA noted that the three-month annualised change was from 6.9 per cent in March to 7.6 per cent in June. 

Further, the RBA noted that there was also a decline in housing loan commitments “across most states in the June quarter” and that this was consistent with slowing activity in the housing market. 

Data released by CoreLogic in late July suggested that more than two in every five Australian homes lost value during the June quarter. 

Further, CoreLogic’s research director Tim Lawless commented earlier this month that the current rate of housing value decline “is comparable with the onset of the global financial crisis in 2008, and the sharp downswing of the early 1980s.”

The RBA also noted that rising interest rates, and the prospect of further rate rises, were contributing to this cooling. 

Earlier this month, the central bank lifted the cash rate to 1.85 per cent as a means to address rising inflation. 

On Thursday (4 August), all four major banks confirmed that, in response to the rising cash rate, they would increase their own variable rates by 50 bps.  

Further, data released by the fintech Joust reported that between June 2021 and June 2022, the number of Australians with a loan-to-value ratio above 80 per cent dropped from 27.85 per cent to 2.83 per cent. 

This drop in commitments was observed across both owner-occupiers and investors. However, the RBA noted that the current value of these commitments “remain close to their highest levels of record”.

According to RBA’s data, owner-occupier and investor commitments, excluding refinancing and first home buyers, accounted for roughly $15 billion and $10 billion in mid-2022.

In mid-2020, owner-occupier and investor loan commitments accounted for a value that was less than $10 billion and $5 billion respectively. 

Further, over this same period, total loan commitments, despite the recent decline, have almost doubled to around $30 billion. 

“Commitments to first home buyers have steadily declined since their peak in 2021, but remain above pre-pandemic levels,” the RBA also said in its report.

Separate figures released by PropTrack last week noted that, between March 2020 and July 2022, housing values increased by 32.9 per cent across Australia. 

Capital cities, on average, lifted by 27.5 per cent over this period, while regional areas surged by 48.8 per cent.   

[Related: Rate hikes not all doom and gloom, economists suggest]