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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