Housing finance declines in May

The case for leaving interest rates on hold has strengthened after new data showed housing finance commitments appear to be cooling.

Australian Bureau of Statistics data for May show that big gains over the year for some categories were offset by monthly falls.

The value of dwelling commitments was $27.5 billion, which was up 17.3 per cent annually but down 0.8 per cent monthly.

The owner-occupied share of those commitments reached $16.7 billion – up 11.4 per cent over the year but down 0.7 per cent over the month.

The investment share of those commitments was $10.8 billion, which marked a 27.9 per cent annual increase and 0.9 per cent monthly decrease.

May 2014 also saw 52,092 owner-occupier dwelling commitments, which was 4.9 per cent higher than May 2013 and essentially unchanged from April 2014.

Established dwellings represented 43,193 of those commitments – up 4.6 per cent annually and down 0.2 per cent monthly.

There were also 2,715 commitments for new dwellings, which marked a 9.3 per cent annual fall and 1.7 per cent annual rise.

That was accompanied by 6,184 commitments for construction of new dwellings, which was up 15.2 per cent on the year and 0.9 per cent on the month.

Real Estate Institute of Australia president Peter Bushby said the May figures indicate that the market is stabilising and that the official cash rate should remain at a record-low 2.5 per cent.

Housing Institute of Australia chief economist Harley Dale said it was encouraging to see monthly growth in the construction and purchase of new dwellings.

“Construction loans, the principal component of new home lending, are at their highest level in over four years,” he said.

“New dwelling commencements are on track to hit their second highest level on record in 2014.”

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