In a surprising twist, September 2023 brought a sigh of relief to the Australian housing sector, as new housing finance, encompassing loan approvals, saw a remarkable bounce back by 2.2%, mounting to a notable $24.8 billion. This was observed across the board with owner-occupier lending witnessing a rise of 2.6% to $16.1 billion, and investor lending escalating by 1.6% to $8.8 billion, as documented by the Australian Bureau of Statistics and CommSec.
Furthermore, a 6.0% increment in the number of private detached house approvals was recorded, marking the largest surge since February 2023. Alongside, the national average petrol price experienced a marginal rise of 0.2 cents per litre last week, making filling up the car tank a costlier affair at around $150 due to the incremental fuel prices, even though the retail margin remained steady at 14.26 cents per litre.
Victoria led the way with a remarkable 22.2% surge in building approvals, followed by New South Wales and Western Australia with a 12.5% and 12.3% increase respectively. Yet, it wasn’t a universal celebration as Queensland witnessed a steep decline of 26.9% and Tasmania trailed with a 10.1% dip in approvals.
The collective dwelling approvals in Australia rose by 7.0% to 13,647, albeit still down by 22.9% compared to the previous year. Breaking it down, house approvals were up by 5.8% to 8,635 and units/apartment approvals rose by 9.4% to 4,779.
On the economic front, the ANZ-Roy Morgan Consumer Confidence index showed signs of improvement, even though the 4-week average of inflation expectations remained stagnant amidst the media blitz surrounding the 5.2% year-on-year August monthly CPI indicator. The ‘Current finances’ indicator, reflecting finances compared to a year ago, touched a 5-month high, shedding some light on consumer financial stability.
Stephen Koukoulas, the Treasury Head of Global Strategy and advisor to PM Albaene, highlighted the sluggish economy, rising unemployment, and dropping inflation, dismissing the anticipations of rate hikes over the last three months. He underscored the gradual setting of the stage for consideration of rate cuts come mid-2024, accentuating the dwindling economic momentum. Koukoulas also projected a petering out in house price increases in the coming months, hinting at a transition to a more stable or slightly upward market rather than a declining one, attributing this to the balancing act of supply, demand, and labour market dynamics.
Peter Ryan, ABC’s senior business correspondent, delivered a mixed economic outlook. He affirmed the Reserve Bank’s decision to maintain the cash rate in the recent Board meeting, however, he also warned of a potential rate hike by year’s end, spurred by the rebounding real estate market and escalating petrol prices. This juxtaposition of stable monetary policy and lurking inflationary pressures paints a complex picture for Australia’s economic trajectory as the year nears its close.
Yet, the road to September wasn’t laden with roses. The ABS data for August 2023 released earlier, elucidated a sombre scenario in Australia’s housing market, with lending and building approvals taking a significant hit due to the RBA’s interest rate hikes initiated over a year ago. The three months leading to August saw lending for new home purchases or construction plummet by a stark 30.3% compared to the same quarter in the previous year. The total number of loans for new home purchases or construction during this period nosedived to the lowest since the Global Financial Crisis in 2008, as stated by HIA Senior Economist Tom Devitt.
The downturn in building activity was in stark contrast to the nation’s low unemployment rate and robust population growth. Devitt indicated that the ramifications of the RBA’s tightening cycle are projected to hit rock bottom in new house commencements only in the second half of 2024. He warned that any further escalations in interest rates would only deepen and stretch this trough further.
The housing market dynamics and the broader economic factors are playing a tug of war, with varying impacts across different states and territories. While September brought a flicker of hope, the underlying economic factors and monetary policies continue to cast long shadows over many Australians’ aspirations of homeownership or property investment. The contrast between the preceding months and September underscores a complex and unpredictable path ahead for Australia’s housing market, with multiple economic variables at play. The interplay of RBA’s interest rate policies, global economic quirks, and domestic market dynamics are expected to keep the stakeholders on their toes as they navigate through the labyrinth of Australia’s real estate and economic landscape.
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