Homeowner and investor loans rose in February, but there is little agreement among economists on what this means for the health of the Australian housing market – one forecaster reports a further 9.3% drop in prices for real estate in Sydney in 2019.
Some economists have expressed cautious optimism that after months of decline markets could bottom out, but CoreLogic-Moody’s Analytics predicts Sydney and Melbourne declines will be worse than expected.
Moody’s said in January that house prices would drop only 3.3% in Sydney, but is now forecasting a drop of 9.3%. Melbourne values are expected to fall further – 11.4%, far more than the 6% forecast in January.
Figures from the Australian Bureau of Statistics released on Tuesday paint a different picture, however, with the steady growth in new household loan commitments, which rose 2.6% to $ 32.13 billion in February, fueled by a monthly increase of 3.4% in the value of homeowner loans. This is the first monthly increase since July of last year.
The number of non-refinancing approvals increased 0.8%, exceeding market expectations by an increase of 0.5%.
RateCity research director Sally Tindall said the hike could be an anomaly or could be evidence that the housing slowdown was slowing. She also highlighted the Commonwealth Bank’s decision on Tuesday to cut a range of fixed rate home loans.
“After a year of frugal lending, some banks realized they needed to find a more sustainable way to mortgage home loans,” Tindall said. “Banks are eager to strengthen their books through competitive pricing. “
But with the value of total household loans still 15.7% lower than in the same period a year ago, others, including ABS chief economist Bruce Hockman, were more cautious about to perspectives.
“The longer-term story is largely unchanged, with new lending to households remaining moderate and well below levels seen over the past five years,” he said.
Westpac senior economist Matthew Hassan said Tuesday’s update was firmer than expected, but signs of improvement were still tentative.
“The market may be starting to find a base in terms of financial activity, but conditions remain generally weak,” he said.
CoreLogic figures show the liquidation rate edged up to 57.2% from 50.9% the week before – this is the third week in a row that the liquidation rate has held above 50%.