Victoria deleverages

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By Leith van Onselen

Last Friday, Victorian Department of Sustainability & Environment (DSE) released ransfer and mortgage data for the month of May, which showed continued weakness in the number of housing transfers and finance commitments.

First, below is a chart showing the rolling annual number of housing transfers from May 2003 to May 2012:

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According to the DSE, the annual number of Victorian home transfers fell slightly over the month – from 172,706 in April 2012 to 172,524 in May – which is the lowest level reached in the series’ history and 12% below average levels.

The DSE’s mortgage finance statistics are unique in that they provide data on both mortgage lodgements (i.e. new mortgages) and mortgage discharges (i.e. mortgages repaid in-full). Below is a chart showing both series on a rolling 12-month basis:

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And below is the number of net new mortgages created, calculated by subtracting mortgage discharges from mortgage lodgements:

According to the DSE, the annual number of mortgages discharged (192,534) actually exceeded the number of mortgage lodgements (191,602), meaning that -932 mortgages were lost in the State of Victoria in the 12-months to May. This compares to the average of around 13,700 annual net mortgage creations since the series began in 2002.

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And below is a similar chart showing that the ratio of mortgages lodged to mortgages discharged:

Between 2003 and 2005, there were around 11 mortgages created for every 10 mortgages discharged. In the 12-months to May 2012, however, the number of mortgages lodged has slipped just below the number of mortgages discharged, signalling that Victorians are deleveraging.

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Overall, the weakness of the DSE data supports the recent deflation of dwelling prices in Melbourne, and suggests that the Melbourne housing market will remain weak into the future.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.