Australian housing market starts to cool

Australian housing market starts to cool

Data released by the Australian Bureau of Statistics (ABS) indicate that the housing market in Australia is starting to cool. Dwelling approvals in Australia fell by 6.7% month-on-month in June, the third consecutive month of a decline.

The value of new housing loan commitments also fell 1.6% month-on-month in June, according to the ABS. However, it remains at a “historically elevated level” of A$32.1bn, according to the ABS.

The Reserve Bank of Australia noted the strength of the housing market. “Given the environment of rising housing prices and low interest rates, the [central] Bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained,” said RBA governor, Philip Lowe.

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Potential credit tightening

Tim Lawless, head of research at real estate data firm CoreLogic, wrote in a note that a “material lift in low deposit home lending or a substantial rise in loans with high debt-to-income ratios” could be the trigger for a fresh round of credit tightening.

“If the quality of home lending does reduce we could see it become harder to secure a home loan, especially for borrowers with small deposits or high debt levels relative to their income. From previous instances for credit tightening, we know that this would probably have a more pronounced effect in dampening housing market conditions,” Lawless wrote.

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