ABS: Home lending stabilizes

After months of consecutive falls, housing finance has finally edged into positive territory with a 0.5% increase on last month in finance approvals for Investors and a 2.4% increase on last month for Owner Occupiers.

Total lending for the month is down -17.6% on June of 2018 with investor loans still -24% lower than the pcp and owner occupiers loans down -15% lower on the pcp.

As is shown in the chart below, Investor loans have been declining year on year for 22 consecutive months whilst owner occupiers loans have been declining for 12 months.

The drop in lending is beginning and the drop in dwelling approvals is now being felt in the Construction industry with Australian Performance of Construction Index declined sharply by 3.9 points from the previous month to 39.1 in July 2019, the steepest contraction in the construction sector since May 2013. The Performance of Construction Index (PCI) is a composite indicator designed to provide an overall view of activity in the construction sector and is based Sales, New Orders, Employment, Deliveries and Prices in the construction sector.

The decline in construction, housing approvals and home loan approvals also point to a worsening climate for the retail sector who are the typical beneficiaries of these sectors. Retailers, particularly in the household & bulky goods categories will be most exposed in the coming years.

We therefore continue to recommend against investments in discretionary retail environments, particularly bulky goods and major regional shopping centres.