Housing finance in Australia continued to fall during the month of July, led by weakness in owner-occupied lending. Investor finance continued to increase, as investors slowly return to the market following last year’s regulatory-induced slowdown. More recent housing indicators remain positive, suggesting to us that overall finance may rebound in the near term.

the value of housing finance dipped by 1.8 percent to USD31.788 billion in July in seasonally adjusted terms, leaving it down 2.4 percent on the levels of a year earlier, data released by the Australian Bureau of Statistics showed Friday.

Tighter surveyed lending conditions for developers are beginning to weigh on finance for construction of new housing. Investor finance for housing construction has finally rolled over, which suggests that the economy may be approaching a peak in building approvals. However, the record backlog of work remaining will continue to underpin further growth in construction activity over the next year, ANZ reported.

The fall in total lending in July predates other more positive data we have seen in the housing sector. There have been renewed strength in house prices and auction clearance rates through August and so far in September. In our view, this suggests that the drop in finance is likely to be temporary.

The value of lending to investors has now risen for three consecutive months and in five of the past six. Compared to a year earlier, the value of lending fell by 9.3 percent, although that decline has narrowed sharply from the 25.9 percent year-on-year drop seen in April of this year.