The value of lending for housing dropped sharply in July as property prices fall in most major Australian cities.
The Australian Bureau of Statistics said new loan commitments for housing dropped 8.5 per cent, or $28.4 billion, on the previous month following a monthly fall of 4.4 per cent in June.
The value of new owner-occupier loan commitments fell seven per cent to $19 billion, while new investor loan commitments fell 11.2 per cent to $9.3 billion.
"Although lending has fallen from historically high levels recently, the value of loan commitments remained significantly higher than pre-pandemic levels," ABS head of finance and wealth Katherine Keenan said on Thursday.
"Owner-occupier loans in July were 40 per cent higher than February 2020, while investor loans were 78 per cent higher."
Meanwhile, home values saw the sharpest monthly drop in almost four decades in August, with the downturn now spreading beyond the major cities.
The monthly decline marks the fourth fall in a row on the CoreLogic index as the fallout from interest rate hikes continues.
The national index fell 1.6 per cent over the month.
The decline has now spread to every capital city except Darwin, with Sydney still leading the downward course - falling 2.3 per cent over the month.
Brisbane's downturn is also gathering pace, with values falling by 1.8 per cent following a 0.8 per cent drop in July.
While regional markets have so far fared better than urban centres, regional home values have started to soften.
In August, regional home values fell 1.5 per cent.
CoreLogic's research director Tim Lawless said the biggest falls were occurring in commutable areas that boomed during the pandemic.
For example, the Sunshine Coast in Queensland saw a 4.5 per cent decline in dwelling values for the month.
Dwelling values remained well above pre-COVID levels despite the softening market, with all regions and capitals except Melbourne still seeing home values at 15 per cent or above the levels recorded in March 2020.
Mr Lawless expects the downturn to continue throughout 2022 and potentially extend into next year, depending on interest rate decisions.
The Reserve Bank is widely expected to hike rates for a fifth month in a row when its board meets on Tuesday.
The ABS also reported private new capital spending fell by 0.3 per cent over the June quarter.
Spending on buildings and structures fell by 2.5 per cent while equipment, plant and machinery rose by 2.1 per cent.
