Home Loans Fall Sharply in May

Data released by the abs today showed that finance approvals for owner-occupied housing declined for the fourth straight month in May, down a seasonally adjusted -7.9%. The chart above excludes refinancings, that number fell a seasonally adjusted -7.1% in May and is now down -27.1% from the peak in June 2007.


The value of loans for owner occupied homes excluding refinancings fell a seasonally adjusted -5.8% in May and is now down -28.8% from the June 2007 peak. Falls in both the number and value of loans for owner occupied homes has been accelerating in recent months. Year over Year numbers as shown below have dropped sharply.


There can no be argument now that the RBA's interest rate hikes have been successful in reigning in domestic demand along with help from the tightening of credit as a result of the global credit crunch.

Slowly but surely the Australian economy is following the lead of the US economy and more recently places like the UK, Ireland and New Zealand. Australia particpated in the global real estate bubble built on a mountain of cheap credit and it will not be immune from the fallout.

The fallacy that we are different down under because of our abundance of natural resources demanded by the developing BRIC countries will be shattered as we slow along with the rest of the global economy in the second half of this year and into 2009.