Housing credit growth subdued in February

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By Leith van Onselen

The Reserve Bank of Australia (RBA) has just released the private sector credit aggregates data for the month of February:

Total credit provided to the private sector by financial intermediaries rose by 0.4 per cent over February 2012, after rising by 0.2 per cent over January. Over the year to February, total credit rose by 3.5 per cent.

Housing credit increased by 0.4 per cent over February, following an increase of 0.5 per cent over January. Over the year to February, housing credit rose by 5.3 per cent.

Other personal credit grew by 0.3 per cent over February, after falling by 0.2 per cent over January. Over the year to February, other personal credit decreased by 1.1 per cent.

Business credit increased by 0.4 per cent over February, after falling by 0.2 per cent over January. Over the year to February, business credit increased by 1.2 per cent.

A chart showing the long-run breakdown in the components is provided below:

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Personal credit growth (+0.3% MoM; -0.1% QoQ; -1.1% YoY) rose slightly in February, but remains lower over the year. By contrast, business credit (0.4% MoM; 0.4% QoQ; 1.2% YoY) and housing credit (0.4% MoM; 1.3% QoQ; 5.3% YoY) grew over the year, but at subdued levels relative to their long-run average growth rates.

Focusing on the housing market, annual credit growth hit a fresh all time (35-year) low of 5.32%. However, the below chart, showing monthly housing credit growth on a 3-month moving average basis (3MMA), suggests that housing credit growth has now levelled-out after trending down since March 2010:

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Finally, a breakdown of owner-occupied credit and investor credit is provided below:

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For the first time since September 2011, monthly investor housing credit (0.5% MoM; 1.3% QoQ; 4.8% YoY) grew at a faster pace than owner-occupied housing credit (0.4% MoM; 1.3% QoQ; 5.6% YoY). However, with quarterly and annual investor credit growth remaining subdued, it’s too early to conclude that investors are finally returning to the housing market.

Overall, it’s another weak data set that supports a continuation of the ‘slow melt’ in Australian house prices.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.