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Housing finance commitments have slumped to 12-month low, suggesting owner occupier borrowers are starting to feel the impact of rising rates.
According to the Australian Bureau of Statistics (ABS), the total value of owner occupied housing commitments dropped from $16.657 billion in March 2009 to $13.534 billion in March 2010.
The fall signals the lowest value of total owner occupier home loan commitments since November 2008, when the figure was $13.063 billion.
Over the month, the number and value of commitments for owner occupied housing finance also fell by 3.4 per cent.
Previously strong property markets such as the Northern Territory, Western Australia and South Australia posted the highest falls in March at 12.1 per cent, 6.8 per cent, and 5.6 per cent respectively.
REIA president David Airey said the nation's owner occupied housing committments were down to the levels recorded at the beginning of the global financial crisis.
“Each month it looks more and more like first home buyers are a dying breed,” Mr Airey said.
Meanwhile, Housing Industry of Australia (HIA) chief economist Dr Harley Dale said the downward trend in new home lending may have a flow-on effect to developers, constraining the housing construction sector.
“We have a debilitating confluence of higher interest rates, tight credit availability, and obstacles related to land supply, planning, and infrastructure charges and taxation,” Dr Dale said.
“These forces are standing in the way of a sustainable lift in new construction in 2011,” he said.
On the flipside, however, ABS figures showed that the total value in investment finance commitments rose by 3 per cent to $6.644 billion in March 2010.
Mortgage Choice spokesperson Kristy Sheppard said despite the rise in investment finance commitments, the market is definitely feeling the overall effect of higher interest rates.
“We really need to see more competition in the mortgage market, the Reserve Bank keeping the cash rate steady for the time being and Australia’s housing undersupply problem addressed, which really hasn’t happened yet,” Ms Sheppard said.
