The tightening of credit has taken its toll not just on investors but owner occupiers with housing loans falling sharply in September.
The value of owner occupier loans fell by 4.2 per cent in seasonally-adjusted terms over the month following on from a 3.9 per cent fall in August, while investment lending dropped 2.8 per cent, according to the latest housing finance figures from ABS.
The number of owner occupier loans fell by 1 per cent over the month, which had been in line with economists’ expectations, while loans for the construction or purchase of a new home dipped by 3.8 per cent – 13.5 per cent lower than a year ago.
The slide in home lending activity over the month has taken the number of loans to owner-occupiers to its lowest level since 2013, according to HIA acting principal economist Geordan Murray.
“Last month we noted that investor lending activity had dropped back to 2013 levels but now owner-occupiers lending has followed suit,” said Mr Murray.
The curtailing of credit as a result of banks cracking down on loose lending practices was likely a key factor in the drop in the total value of loan commitments, according to AMP Capital chief economist Shane Oliver said.
Buyers not having to spend as much on property as prices fell, particularly in Sydney and Melbourne, could also have contributed, he said.
“This is a big deal, the weakness had been concentrated to investors, but it now seems the weakness is spreading to owner occupiers too,” Mr Oliver said.
Until earlier this year owner occupiers has been holding up quite well, but that had changed “quite sharply” over the past few months, he said.
The credit crunch is continuing to have an effect on property investors too, with investment lending down 2.8 per cent over the month to $9.75 billion – its lowest since 2013, following a drop of 1.4 per cent in August.
Total owner occupier loans are at their lowest in value since July 2015 at $19.37 billion.
There is no end in sight to the tighter lending conditions imposed by banks and several economists predict price falls will begin to ease after 2020.
Nationally, property prices fell 3.5 per cent over the year to October, but Sydney has borne the brunt with values dropping 7.4 per cent, the largest annual decline since 1990.
Borrowers have come under increasing pressure by banks to justify their household budgets and provide extensive details about their spending on things like childcare, education, entertainment and bills.