Home loan approvals in Western Australia retreated for a third straight month in December after a reduction in government subsidies and interest rate rises dampened enthusiasm for mortages, economists say.
Home loan approvals in Western Australia retreated for a third straight month in December after a reduction in government subsidies and interest rate rises dampened enthusiasm for mortages, economists say.
WA housing finance commitments for owner-occupied housing fell 2.73 per cent in December, seasonally adjusted, to 7,264, the Australian Bureau of Statistics said today.
Total housing finance by value fell 5.5 per cent to $2.07 billion.
Nationally, housing finance commitments fell 5.5 per cent in December to a seasonally adjusted 55,632, which was weaker than economists' expectation for a fall of 5 per cent in the month.
Total housing finance by value fell by 2.8 per cent in December, seasonally adjusted, to $21.9 billion.
National Australia Bank senior economist David de Garis said the pullback in approvals for housing loans was expected after federal government stimulus measures were wound back and increases to interest rates during the final quarter of 2009.
The federal government reduced the first home buyers grant boost from $21,00 to $14,000 on October 1 and lowered it to $7,000 on January 1 this year.
The Reserve Bank of Australia raised the overnight cash rate by 25 basis points to 3.75 per cent on December 1, following similar moves in October and November.
Subsequently, the central bank left the cash rate unchanged on earlier this month.
"It is probably largely due to the departure of the first home buyers, who did all their borrowing and buying in the past months," Mr de Garis said.
"When you look at the high levels we had a quarter or so back, we are getting some payback from that due to the stimulus measures."
Loan approvals for the building of dwellings fell for the second consecutive month, down 6.4 per cent in December, the ABS said.
Demand for mortgages to buy new houses bucked the negative trend, up 3.0 per cent in the month, while loans for investment housing rose 1.9 per cent.
"Investment housing is up, that is suggesting the sector is picking up a little bit of momentum," Mr de Garis said.
Citigroup senior economist Joshua Williamson said the increase in investor finance was a "silver lining" in the housing loans data.
"For the third consecutive month, investor finance values rose," Mr Williamson said.
"This is a positive sign as this segment of the market had previously been languishing and if sustained would be welcome by the RBA in boosting dwelling supply."
Mr Williamson expects housing investment to be firm in 2010 despite the recent pullback.
"Strong population growth, a high level of building approvals in the pipeline and expectations for a further improvement in the labour market are set to keep dwelling investment as a positive contributor to GDP growth," he said.
RBC Capital Market senior economist Su-Lin Ong said the removal of the first home owners boost and rate rises had helped drag approvals for housing finance to a 12-month low in December.
"Further declines are likely in early 2010 with the grant returning to its original amount from 1 January," Ms Ong said.
"Clearly the combination of soaring house prices and higher cost of borrowing is starting to deter some borrowers, although pipeline approvals point to a strong upswing in dwelling activity in 2010."