Mortgage data indicates ongoing melt

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As UE noted earlier, the ABS has updated its 5671 dataset today which means it is time for me to update the charts that give us a sneak peak of the direction of the housing market. For those new to these charts here is what I said last time:

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.

As the AFG data is the leading indicator, today’s update is just to see that the the ABS data is following the AFG data as it should. However, what I did notice this morning is that the ABS have thrown in a curve ball for both datasets:

REVISIONS

In this issue revisions have been made to the original series as a result of improved reporting of survey and administrative data. These revisions have impacted on:

  • Owner occupied housing for the period January 2003 to October 2011
  • Investment housing for the period January 2003 to October 2011
  • Housing loan outstandings to households for owner occupation series for the period November 2008 to October 2011.

Seasonally adjusted and trend series have been revised as a result of revisions to the original series, the incorporation of estimates for the latest month and the revision of seasonal factors due to the concurrent seasonal adjustment methodology.

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I haven’t contacted the ABS directly to find out exactly what this means as I have determined that these changes have little- to-no-effect on these particular charts as I am only looking at trends. It is possible that these revisions are in someway related to the recent Westpac debacle. If you have your own models based on any of this data then you will need to go back and reload the entire datasets as some of the figures have changed substantially.

To the charts.

NATIONAL:

VIC:

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NSW:

QLD:

WA

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It isn’t hard to see which state is doing the heavy lifting with NSW enjoying a decent pop while the other states are treading water. NSW’s outperformance is likely due to the change in stamp duty regulations which means that from January 1 2012 first home buyers will only be eligible for a stamp duty exemption on newly built and “off the plan” homes. Given this, it is likely that the NSW market has been distorted with purchases that would have usually occurred in early 2012 being pulled forward.

With all that in mind, along with current issues with facing the Australian banks around funding, my expectation is for a slow start to 2012 and therefore the slow melt to continue.