Australian housing finance drops in March, large construction backlog to support activity in 2018

Australian housing finance fell in March, unsurprisingly, given that March was a subdued month for the housing market. Total housing finance fell 4.8 percent sequentially and down 6 percent year-on-year. The value of Australian housing finance commitments dropped heavily in March, with the investor segment driving the fall at -9 percent sequentially.

This is the most subdued monthly result for investor borrowing since September 2015, when APRA’s macroprudential policy restricting lending to investors was in full effect. On the previous occasion, the owner-occupied segment countered much of the investor softness, but that was not the case in March.

The fall in investor borrowing signifies that investors just accounted for 42 percent of transactions nationwide -  the lowest level since 2012. While this result predates APRA’s recent decision to remove the 10 percent ‘speed limit’ on investor borrowing, it is hard to see a re-acceleration in the investor segment with confidence clearly subdued. However, recent announcements from several banks have seen some cuts to investor mortgage rates, which could help ensure such a sharp fall in borrowing is not repeated, noted ANZ in a research report.

Meanwhile, the finance for new dwellings has begun trending lower, which implies that the recent rise in building approvals would soon run out of steam. This will not impact the construction outlook though, as a large backlog of work would still underpin activity this year, added ANZ.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was highly bullish at 109.072, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -122.16. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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