Housing finance is entering a slower phase, according to the RBA, as government policy and rising rates reshape demand nationwide.
The Reserve Bank of Australia (RBA), in its August Statement on Monetary Policy, has warned of a “sharp” recent decline in new housing loan commitments, led by investors retreating amid higher rates, weakening housing conditions, and property-tax changes.
While it noted that overall credit had held up to midyear (total credit growth was up 8.6 per cent in six-month-ended annualised terms in June), the central bank said weaker dwelling prices would increasingly weigh on mortgage growth.
“Total credit growth has been relatively stable over the year to date but is expected to ease over coming months as declines in housing prices flow through to housing credit growth,” the RBA said.
The central bank stated that housing credit had eased by around 0.5 percentage points in six-month-ended annualised terms since the RBA’s May statement.
Investor demand drives decline
The central bank said that the more significant development was the fall in new lending commitments, which are a lead indicator for future approvals and settlements.
It described the recent decline in new housing loan commitments as “sharp” and added that the fall had been driven primarily by weaker investor activity.
The RBA attributed the decline to the combined effect of softer market conditions, higher rates, and changes to investor taxation.
“The decline in new housing commitments reflects the combined impact of the easing in established housing market conditions, increases in interest rates and recently announced tax changes for property investors (related to negative gearing and capital gains tax),” the statement said.
“This is expected to flow through to a further slowing in housing credit growth in the months ahead.”
The assessment reinforces a pattern emerging across the wider market, with the Commonwealth Bank of Australia (CBA) reporting on Wednesday (12 August) that mortgage applications had fallen 15 per cent since May, with investor applications down 28 per cent.
However, it stressed that household balance sheets had remained resilient, with “strong” historic flows into offset and redraw accounts, meaning many borrowers held sizeable repayment buffers.
Yet it added that additional mortgage payments into those accounts declined slightly in the June quarter.
Business debt offsets mortgage slowdown
The housing-finance slowdown is occurring alongside continued “strength” in business borrowing.
The RBA said business-debt growth remained strong and broad-based, with property-related sectors among the largest contributors.
“The strength in business debt growth has been broadly based across industries, with the industrials and real estate sectors contributing strongly to the recent growth,” it said.
ANZ cuts price forecasts
Australia and New Zealand Banking Group (ANZ) has separately lowered its housing outlook, stating that the market had deteriorated more rapidly than it initially expected.
“Since our last forecast update in June, the housing market has softened a little more than we were expecting. Sydney and Melbourne prices have declined slightly more than our forecasts, and prices in Brisbane and Perth have started falling earlier than we expected,” ANZ said.
“It is clear the combination of restrictive interest rates, recent tax policy changes and global uncertainty have dampened sentiment in the market.”
Reflecting that reassessment, ANZ said that “in light of this, we have slightly lowered our expectations for dwelling prices over the coming year”.
The major bank now expects capital-city prices to decline 4.3 per cent this year and 3.4 per cent next year, implying a 10.6 per cent peak-to-trough fall.
Sydney is forecast to experience the deepest fall, with prices expected to drop 14.5 per cent from peak to trough, followed by Melbourne at 12.8 per cent.
ANZ expects falls of 9.8 per cent in Adelaide, 7.9 per cent in Brisbane, and 5.2 per cent in Perth.
While Brisbane and Perth are expected to be more resilient, ANZ said Adelaide faced a different mix of pressures.
“Adelaide should be more exposed, due to affordability constraints and supply and demand being more in balance than Perth and Brisbane,” it said.
ANZ also expects a lasting change in the composition of housing finance, with investors expected to bear the greatest impact from higher rates and tax changes.
The bank said: “One area we expect to see a structural shift is in the split between investor and owner-occupier credit growth.”
The bank is forecasting investor housing-credit growth to slow from 10.2 per cent year on year in the June 2026 quarter to -0.8 per cent in early 2028.
It expects owner-occupier credit growth to trough at 3.7 per cent and total housing-credit growth to slow from 7.5 per cent in 2Q26 to 2.2 per cent in 1Q28.
[Related: Mortgage applications fall at Westpac as proprietary share dips]
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