High-rise projects driving 2015 dwelling approvals: Matthew Hassan

GUEST OBSERVATION

The headline ‘number of owner occupier finance approvals’ rose 1.6%, a touch above the consensus forecast of a 1% gain but not overly strong for this often volatile monthly series.

The headline is being boosted by strong refinance activity – this segment rose 4% in March following a 3.2% gain in Feb and is up 21%yr, accounting for a record 37.6% of all owner occupier finance approvals.

Ex refinance, approvals are up just 0.3%mth and down 3%yr. With refinance effectively ‘churn’, the net figure is more meaningful for gauging credit growth overall and suggests this is still very muted for the owner-occupier segment.

The other detail shows more softness in construction-related owner-occupier approvals, now down over 4%yr (on a combined basis including finance for newly built dwellings).

Construction related approvals remain a relatively high proportion of all approvals though. Note also that recent gains in dwelling approvals have been driven by high rise projects that are less closely linked to these finance indicators.

The value of loans to investors jumped 6.4%mth, more than reversing last month’s 3.3% drop that had hinted at some cooling in this segment. That now looks to be misleading with the value of approvals up 20.9%yr.

That in turn suggests little or no impact to date from macroprudential pressures aimed at containing lending growth to this segment with these growth rates in new loans unlikely to be consistent with APRA’s 10% guideline for growth in the total stock of investor loans, noting that system-wide investor credit growth is already tracking at 10.4%yr.

The state breakdown of owner-occupier approvals showed broad gains across all the major states suggesting lower interest rates were a common positive factor in the month.

MATTHEW HASSAN is senior economist with Westpac.