Home lending moderated in the month of October, with the value of home loans falling 1.4 per cent on seasonally adjusted terms. The ABS figures were slightly better than expected given the headwinds of higher interest rates and reduced stimulus measures. Analysts had forecast a two per cent decline.

Home lending for owner-occupiers fell 1.7%, while lending to investors recorded a more sedate 0.6% drop. Lending to home buyers to build or purchase new dwellings defied the increase in interest rates in October, however, rising once again.

Housing Industry Association Senior Economist, Ben Phillips, said that loans for the construction of new dwellings and the purchase of newly-built homes combined increased by 5.7 per cent following a rise in September. New housing loans have now increased in 13 out of the last 14 months.

“The strength of lending to owner occupiers continued to be countered by weakness in loans for new investment housing, which experienced a fall of 0.6 per cent. Loans for new investment housing were down 10.5 per cent over the last 3 months relative to the corresponding period of the previous year,” he noted. “The housing industry will be relying on a strong investor market over 2010 to assist in a broad-based housing recovery through 2010. The investment lending figures bode poorly for this outcome and signal another year of skinny rental vacancies and upward pressure on rents.”

During October, loans for the construction of new dwellings increased by 9.2 per cent, while loans for the purchase of newly-built dwellings dropped by 3.9 per cent.

The total number of seasonally adjusted loans for owner occupiers (net of refinancing) dropped by 1.5 per cent in the month of October 2009 but was up by 37.4 per cent compared to October 2008.

In seasonally adjusted terms the total number of owner occupier loans (net of refinancing) in October 2009 declined in New South Wales (5 per cent), Queensland (0.6 per cent), Victoria (0.4 per cent), the Australian Capital Territory (1 per cent) and South Australia (3.8 per cent). The total number of loans increased by 0.8 per cent in Western Australia, the Northern Territory (7.9 per cent) and by 6.2 per cent in Tasmania.