Australian Finance Group (AFG) has released its housing finance data for the month of December, which registered a seasonal 21% decline in mortgage applications over the month, but more importantly (since the series isn’t seasonally-adjusted) a 22% increase in the number of applications over the year. It was also the Group’s strongest December on record, with 7,213 mortgage applications (valued at $3,054 million) processed over the month (see next chart).
AFG also reported a further shrinking of the first home buyer (FHB) mortgage share in December, driven by weakness in Victoria following the recent removal of grants on pre-existing dwellings:
- National: 10.2%, down from 12.5% in December 2012;
- New South Wales: 3.5%, down from 4.2% in December 2012;
- Victoria: 8.7%, down from 16.5% in December 2012;
- Queensland: 6.2%, up from 4.5% in December 2012; and
- Western Australia: 21.8%, down from 23.2% in December 2012.
Investors are now driving new mortgage demand, with their share of mortgages at 38.8% in December, according to AFG (see next chart).
Below are the investor shares by major market:
- National: 38.8%, up from 38.0% in December 2012;
- New South Wales: 48.9%, up from 46.3% in December 2012;
- Victoria: 36.6%, down from 37.2% in December 2012;
- Queensland: 34.9%, down from 35.9% in December 2012; and
- Western Australia: 30.8%, up from 30.5% in December 2012.
As noted previously, some caution should be exercised in interpreting AFG’s figures and extrapolating its results to the overall mortgage market, as measured by the Australian Bureau of Statistics (ABS).
AFG’s data measures mortgage applications, whereas the ABS measures actual mortgage commitments. According to AFG’s General Manager of Sales & Operations, Mark Hewitt, just over three quarters of applications on average become mortgage commitments, although this figure can obviously fluctuate month-to-month. AFG’s market share has also been rising in recent years.
Therefore, while AFG is a useful guide as to the strength of mortgage demand, its results do not necessarily translate to the overall mortgage market as captured later by the ABS.
To illustrate, consider the below chart showing how the growth of AFG mortgage applications has diverged significantly from ABS mortgage commitments since November 2009:
Nevertheless, the AFG data supports yesterday’s ABS housing finance release for November, which revealed a continued disappearance of FHB’s from the mortgage market.