Housing finance recovers a bit more

ABS Housing Finance key points above. I’ve graphed results by state below:

All states showed some level of ongoing recovery from the early 2011 hammering but all, with perhaps the exception of Victoria, are still looking very anaemic with most states showing monthly housing finance commitment levels first seen a decade ago.

When we dig into the split of loans by purpose, this structural weakness is just as apparent:

Note that owner occupier finance for established dwellings fell in May whilst refinance activity is looking very strong. Obviously, this mix is not terribly promising for any recovery in housing values. There is better hope for that in the ongoing recovery in investor finance for established dwellings, however it too is still running at monthly levels first seen in 2003.

On the whole the May report confirms an ongoing sideways to downward shift in house prices.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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Comments

  1. Whoa! Refis up 11.4% in May, following a 8% jump in April (seasonally adjusted).

    Total OO loan no.s excluding refi’s only up 1% in May, following a 3% rise in April.

    Owner occupier demand still below 2008 levels (just) on that basis, but I’m sure the headlines won;t reflect that at least.

    By why all the refis? Can’t be equity mate withdrawals, unless its for renovations? Or is this the increased lending competion we’ve been hearing about in effect?

    • Agree on all counts. I suspect the refi boom is the result of competition mostly, unless folks have been listening to bullhawkian bluster and are shifting to fixed rate loans as a hedge against higher rates…

      • I have actually been asked by friends with mortgages (FHBs) what they think on rates, re: fixing all or part, considering a possible rate rise.

        So, that is just some anecdotal evidence that there may indeed be a good deal of rate fixing in those figures…

        Stewart

        • There will also be a proportion of people (mainly investors) trying to lock in the current equity they have through a refinance. To be honest, if you have a property with some equity available it is the rational thing to do. This gives them the extra credit facility if they need it, but it doesnt mean the money is being spent or re-invested in housing.

          I wonder also if there was a spike of fixed rate loans a few years ago?

          Either way, increased refi activity and everything else pretty flat is no recovery. If anything the increased refi activity signals lower sentiment in the market.

    • “but I’m sure the headlines won;t reflect that at least.”

      LOL.. Are you the business editor at SMH?

      Home loan rise signals recovery

      “Mr Cannington also said bank lending had returned to be the highest in about two years, suggesting a recovery from the global financial crisis.”

      Also, there are signs of Mad Adam’s tragic capitulation:

      “Mr Carr said he expected a ‘fairly strong second half’ in which interest rates remained on hold.

      ‘I think that it is quite obvious the Reserve Bank is not going to be hiking rates while sentiment is so poisonous,’ he said”

      Yepp, blame it on poisonous sentiment!!

    • It’s also Boomers refinancing to make voluntary contributions to super for tax reasons, they then pay that part of the loan back in under a year and do it again next year.

      After all the talk about house prices being a function of the velocity of the credit market does anyone think that this data is evidence for a turning point in prices?

      • Personally, no, I see no house price recovery in these numbers. They are consistent with stabilisation and ongoing slow falls. We’ve had two months of reverting data. But look at state by state comparisons. We are far below levels of credit creation associated with house price growth. RBA credit aggregate growth is still at thirty year lows. O/O debt is going nowhere and refis booming. There seems to be a bit of stir amongst investors but that is about it.

        If you think that the commodity boom will continue then the RBA will raise rates by year end to snuff housing out. If you think (as I do) that the risk of the global recovery stalling is on the rise then you have to ask whether falling commodity prices will boost Australian housing. A vexed question.

      • No upward pressure on property prices on these numbers. They’re still below 2010 and 2008 numbers after all, and if the Macrobusiness analysis is right then the current market is still under the delayed influence of the previous months’ fall in demand.
        Plus FHBs are still not moving back into the market in any great numbers, so without that “new money” and flat/falling cap growth restricting equity withdrawal demand is constrained. Only cheaper credit could be inflating prices, and the only possible source of that it seems is banks cutting loan margins – possibly leading to the rise in refis.
        But if property prices are still flat/falling come Spring, and with no fiscal or monetary help for borrowers on the horizon where’s the demand boost going to come from to meet the seasonal jump in listings? Without enough “greater fools” it will still be suppliers having to meet the lower market expectations of buyers.

  2. Torchwood1979

    Will be interesting to see the QLD figures for June when released. Anecdotal evidence suggests a significant uptick in mortgage applications in QLD, presumably as a rush to beat the stamp duty increase.

  3. I have noticed also that there is less stock on the market in various parts of Australia, though I mostly watch WA and National.
    Would this be due to more people buying or people taking it off the market in winter?

    • …if I may be so bold as to, once again, provide my own perspective…

      As per the relevant BurbWatch charts, Total listings (rent + sales) seem approximately stagnant for the time-being, with sales listings generally slowly decreasing, and rental listings increasing (and approximately offsetting sales listings reductions)

      Also, there has been a post-Easter uptick in relative sales, which has remained for the time-being.

      I interpret this as indicating the first part of what you said, re: more people buying – the overall, state-by-state indications were for a post-Easter pickup in activity, which still seems to have a little steam in it.

      I do not have data for de-listings (taking a sale or rental totally off the market) just yet, but would suggest that whilst i’m sure this is happening in some instances (eg. for winter), the data (that I have at BurbWatch) seems more consistent with the idea of sales converting to rentals; currently, widespread anecdotal evidence seems to support this idea.

      My 2c

      • Yes, I like your site. I follow it along with SQM. Are you able to link your weekly updates as an article here? Would be good to market and get your website out there a bit more.

  4. With EU credit markets burning and problems spreading to China (Shibor up 3% in one day and touching 7%) this may be one of the last chances to get a high LVR home loan.

  5. Another comment from little me…

    Should also consider that people might be borrowing to reno the house (either OO or IP), to either move it faster or move it for more money.

    It’s just that there is still plenty of that sort of belief left in sellers at the moment, and i’m sure many are also believing the common meme i hear that “the right property still sells well”.

  6. Guess who wrote this?

    certainly there is no sign of recession or even a non-mining recession in these numbers. In particular, lending growth in New South Wales and Victoria has rebounded alongside the pick-up in the mining states. The pick-up is uniform across the states, in other words. Again, and as I have highlighted in the past, it shows why talk of the ‘soft patch’ or the ‘two-speed economy’ is much exaggerated and utterly misunderstood – and especially why talk of a recession in the non-mining economy is absurd.

    • Really makes you wonder if these guys think they can keep the market going by just their pure willpower alone.