The total number of owner occupier loans in Western Australia dropped 3.3 per cent during July, the first fall in nine months, and economists forecast the downward trend to continue over the next few months.
The total number of owner occupier loans in Western Australia dropped 3.3 per cent during July, the first fall in nine months, and economists forecast the downward trend to continue over the next few months.
The number of home loan approvals for owner occupier housing in WA fell from a seasonally adjusted 7,596 in June to 7,344 in July, the Australian Bureau of Statistics said today.
The fall is the first monthly decline since November 2008, when approvals dropped by 8 per cent from the previous month.
Nationally, approvals fell by 2 per cent in July, seasonally adjusted, to 63,259. It is the first fall in 10 months, the ABS said.
The fall was worse than market forecasts for a fall of 1 per cent.
Royal Bank of Scotland chief economist Kieran Davies said demand for housing loans would continue to recede during the next few months after many first home buyers rushed to make their purchases before June 30.
"I would expect that over the next few months you are likely to see further weakness in the owner-occupier space because people were rushing to beat the original June deadline for the increased grant," Mr Davies said.
"The government subsequently extended that to December but the numbers suggested that a lot of people were reacting to the original deadline."
In October last year, the federal government doubled the first home owner grant to $14,000 for existing homes and tripled it to $21,000 for new homes.
The temporary boost was due to expire on June 30 this year, but the government extended it to September 30.
From October 1, the grant reduces to $10,500 and $14,000, respectively, before reverting to $7,000 on January 1, 2010.
The share of first home buyers taking out new loans fell for the second consecutive month in July, to 25.7 per cent from 27.1 per cent in June. It was the lowest proportion of loan approvals for first home buyers since December 2008.
Westpac senior economist Andrew Hanlan said approvals for home loans had surged in the past year and reversed the fall over the first half of 2008 due to stimuli from the federal government and the Reserve Bank of Australia (RBA).
Between last September and April, the central bank lowered the cash rate by 4.25 percentage points to a 49-year low of three per cent.
"Additional government incentives for first home buyers - which are being phased out between October and December - and extremely low interest rates have ignited pent-up housing demand," Mr Hanlan said.
National Australia Bank senior economist Spiros Papadopoulos said increasing expectations that the RBA would begin raising interest rates would dampen demand for new housing loans for first home buyers and investors.
Debt futures markets have priced in a 25 basis point lift to the cash rate in November.
"In August of course, speculation heightened on upcoming rate rises, suggesting further bumps ahead for approvals as the threat of rate hikes starts to affect first-time buyers," Mr Papadopoulos said.
"On the investor front, the four per cent fall in July comes after the 2.3 per cent fall in June, which had followed three consecutive rises," he said.
"It appears as though investors had already started to reassess in June/July where the market may be heading once interest rates start to move higher."
