New home finance takes a breather

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By Leith van Onselen

A disappointing aspect of today’s housing finance data for November, released by the Australian Bureau of Statistics (ABS), was that mortgage demand for new homes remained flat over the month, although it did rise by 17.2% over the year and was tracking 12% above the 5 year moving average (see below charts):

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Looking at at the state-by-state breakdown, which is presented below on a rolling annual basis since it is not seasonally adjusted, shows that the recovery in new home finance continues to be driven by New South Wales and Western Australia, although Queensland and South Australia also seem to be picking-up as well (see next chart).

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The outlook remains good for a cyclical lift in the new home sector. In addition to nominal mortgage rates remaining near the lowest level on record, all jurisdictions (except the Northern Territory) are in the process of shifting first home buyers (FHBs) grants towards newly constructed dwellings, which should shift FHB demand towards new construction in the months ahead [Western Australia and the ACT joined New South Wales, Queensland and Victoria in favouring new dwellings from the beginning of October 2013, with South Australia set to follow suit later this year].

That said, with land prices remaining stubbornly high, and state planning systems, taxation, and infrastructure provision remaining unfavourable towards new development, there are major structural impediments working against any construction uplift, meaning that the overall improvement in new home construction is unlikely to be anywhere near enough to pick-up the slack left as the mining boom unwinds (see next chart).

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As argued repeatedly, a genuine and sustainable construction boom requires reforms to the supply-side, not demand-side stimulus.

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3 Responses to “ “New home finance takes a breather”

  1. flawse says:


    I can tell you that Gold Coast RE is now back to the boom levels of 2010 in the $450K to $550K bracket. I’ve just looked at a house for a friend this morning. Listed at the same price as 2010 it had attracted three offers with one at the same price as 2010 price. I expect it will eventually go for a higher price.
    This is a market that was recently 20% below 2010.

    Well done Glen, Gail et al. You’ve got your RE boom! Now we can all just sell each other real estate. No need for no stupid factories or farms.

  2. Dulong Ttil says:

    Japan has been applying an assertive Monetary Easing Policy, which drives the YEN downwards successfully. The immediate result shows that their Export and Tourism industries have picked up swiftly. Japan is now enjoying healthy export growth and has much more tourists visiting Japan.

    With the sound and robust stimulation by Japan’s Monetary Easing Policy (which in fact mainly injecting more printed notes into the market by their Central Bank), the Nikkei has soared from 10,398 to 16,291 just in 2013. Nikkei marks its best performance in forty years, and also the top performer among Asian markets in 2013. Analysts name this “Nikkei Ends Year on a High in Quiet Asia”. Can we see the power of an aggressive Monetary Easing Policy now?
    Australia can consider this as a viable option to improve our economy outlook and, our export can be improved instantaneously.

    A lower $A can help to improve our Export opportunities, save the Australian farmers and manufacturers and reduce our trade deficit. It can also help to improve our Tourism industry, which has been damaged due to high $A. When our ecomony is improved, our property will be improved at the same time.

    Another though is to engage a linked currency with USD, (e.g. A$1:US$0.80), which can give overseas investors good confidence in our economy stability.

    • flawse says:

      I applaud the idea of ‘fixing’ the currency to take away instability. However it is easier said than done. We have to design sustainable fiscal and monetary policy for this to be possible.

      You cannot begin to compare the economies of the two countries Japan and Australia. The response to devaluation would be entirely different. Further the conclusions from this experiment are based on a very short period of time. Money printing is a very short term fix with long term consequences for the economy, the social structure, and the environment. Economic study really has deteriorated as far as time frame is concerned.