The latest AFG mortgage index report was released yesterday. As MacroBusiness readers may remember I use the AFG lending volumes as a leading indicator of the direction of the home lending market as they appear to be a relatively good leading indicator for the official ABS data in the 5609 and 5671 datasets.
For those who don’t know, the ABS 5609 and 5671 datasets contain owner occupier and investor housing finance data. The trends in these datasets appear to have a good correlation with the movement in house prices. So basically by using the AFG volume data you get a fairly reliable 1-2 month leading indicator on house price movements across Australia. The correlation to house prices isn’t perfect because you obviously have to take account of the supply side, but you can see from the charts, the data is worth taking notice of.
Firstly at a national level the trend is up a little, although December isn’t completely supportive.
NSW looks to be following a slightly stronger uptrend, however it should be noted that this data is likely to be effected by recent changes in stamp duty legislation which means that first home buyers who purchase an existing dwelling after Dec 31 2011 will not receive a stamp duty concession. That being the case, the new year’s data may fall away further than previous years.
Victoria appears to be stalling slightly which is a concern given the supply side in that state.
QLD looks relatively flat, which is an improvement on the previous trend and suggests we may see slowing of price falls moving into the new year.
While WA still appears to be struggling to find momentum.
The report also contains some other interesting data about loan composition.
AFG Mortgage Index shows the proportion of fixed rate loans rise to 19.2% in December, up from 17.2% the month before, as more borrowers chose to lock in rates. This figures is not far off the high of 20.4% for fixed rate loans recorded in October.
Seasonal trends saw mortgage sales volumes decline month on month by 26% in December, which together with January are quieter months for the industry. But compared to December 2010, sales volumes were up by 5.4% nationally.
Across Australia, NSW’s December sales volume increased on December 2010 by 15.6%, QLD 7.7%, South Australia a very strong 44.8%, with contractions recorded for WA (3.9%) and VIC (8.9%).
Although it is true that December is usually quieter than November , the 26% m/m decline is unusual, this maybe the effect of stamp duty changes in NSW bringing forward some purchases. I also think the sample size for South Australia is too small to be reliable and so I never report it. Although the report suggests there has been a massive leap in lending over the last 12 months, actual lending in South Australian been relatively flat all year.
The ABS datasets will be updated with the November lending finance data on Monday and Tuesday of next week, so I will provide some updated charts after those releases.
The full report from AFG is available below: