Guide to Understanding Home Loan Approvals in Australia

What home loan figures are published?

Every month the Australian Bureau of Statistics (ABS) publishes Housing Finance figures. These figures provide info on the number and value of loans undertaken for different housing purposes (e.g. investment property). The key figures reported are:

Value of dwelling commitments

  1. Total value of dwellings financed
  2. Owner occupied housing financed
  3. Investment housing – fixed loans

Number of dwelling commitments

  1. number by:
    1. Owner occupied housing (including first home buyers)
  2. Purpose of finance for owner occupier
    1. Construction of dwellings
    2. Purchase of new dwellings
    3. Purchase of established dwellings
  3. Type of lender
    1. Banks
    2. Non-Banks

Some figures are also reported for each state.

Example release here:[email protected]/mf/5609.0

Right, what do the housing finance figures mean?

Firstly, ‘housing finance’ refers to how housing is financed. Specifically, the ABS figures report on how housing is financed with loans as opposed to financing with cash deposits. So these figures show us important details about the size and number of loans undertaken to buy property.

Why do we care about home loan figures?

If people aren’t getting loans to buy houses then it signifies less demand to buy property. The alternative of course is to rent instead of buying.

The housing finance figures are also watched closely because they partly reflect consumer sentiment, as well as the effects of interest rate changes. E.g. interest rates may be cut dramatically and at the lower rates you would expect to see housing finance increase.

What do they mean for the property market?

The money shot is below. It shows that home loan approvals lead house prices. Thus a decline in housing approvals may be a warning sign that house prices may come off.

Australia House Prices Vs Building Approvals