Mortgages, transfers blast off in Victoria

By Leith van Onselen

The cash-strapped and stamp duty-addicted Victorian Government might breathe a sigh of relief after Department of Sustainability and Environment (DSE) released data revealing a big surge in housing transfers in the month of October.

It was the highest number of October transfers since 2009, with 15,336 homes changing hands, up 26% from the 12,140 transfers in September. A chart plotting the series on a monthly and 3-month moving average (3MMA) basis is shown below.

The rise in transfers in October has lifted the rolling annual series off the canvass. The annual number of transfers hit decade lows in September and remain highly depressed, despite October’s lift (see below chart).

The increase in transfers was also met with an increase in mortgage lodgements (i.e. new mortgages created), which posted their best October result since 2007 and a 30% increase on September’s volumes. That said, mortgage discharges (i.e. mortgages repaid in full) rose by a similar amount, and continues to out-number mortgage lodgements (see below charts).

In the year to October 2012, 189,583 mortgages were lodged in the state of Victoria, -13% below the 10-year average. Over the same period, 191,581 mortgages were discharged across the state, which was -7% below the 10-year average. Accordingly, the state of Victoria lost nearly -2,000 mortgage over the year. This compares to an average of 13,036 net mortgage creations annually since the series commenced in January 2002 (see below charts).

The Australian Bureau of Statistics is scheduled to release its September housing finance statistics on Monday, which will provide further colour on how the mortgage market is travelling.

Twitter: Leith van Onselen. He is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.

Leith van Onselen
Latest posts by Leith van Onselen (see all)


  1. I presume that Octobers transfers are Septembers sales. AFG reported improved October numbers, so the November transfers may be up a little as well.

      • reusachtigeMEMBER

        And add to this, where’s the damn unemployment that we keep hearing about on here? Close to full employment and they still whinge for interest rate cuts. “Oh, but it’s coming” was said 12 months ago … Silly Billies!

        • Come on, you must be kidding. The reality is we have approximately 18% unemployed and underemployed and this number will increase next year. I read many posts on this blog from people who a clearly living in the netherworld of their own spin or the spin they are fed by their masters.

          2013 will play out and if you can believe one thing it will make 2012 look like a picnic. Enjoy your job while you have one.

        • Those of us that know how the ABS guesstimates unemployment, and Australia’s booming welfare industries, like, the number of JobService providers that are around now, don’t bother going on about Australia’s high unemployment rate.

          Leave to those who just quote the official statistics.

          We have a strong banking system, with sound economic fundamentals, and an unemployment rate the envy of the world. Oh yeah! There are green shoots everywhere too.

    • Better to leave the cash rate alone, or lower it, and start reconfiguring other components of the property market than attacking the very part of the economy that needs help. How about we raise Stamp Duty, first, or mandate a change to banking reserve ratios before we start work on interest rates!

      • How about some focus on LVRs as well? Maintain a lower cash rate to take pressure off the dollar and tell housing investors to bring more money to the table?

          • This is interesting.

            I’ve just had a conversation with six Canadians and they are all convinced that interest rates are going to go up next year.

        • New buyers aren’t a problem.

          Unwise at this price, but not a problem.

          Taking on debt now means decreased consumption in the future. Lowering interest rates so there is no forfeiture of consumption in the future is wrong, and steals from one group to give to the other.

          If the cash rate is lowered because the rest of the economy is harmed, then lower it and put a levy on IP mortgages.

          If not lowered, then fiscal policy can be to reduce grants to state and local government, so they have to put up rates and land taxes to retrieve it.

          One a house comes with increased, enduring financial obligations, then principal will be lowered correspondingly.

    • +1000000

      Time to lift rates and force the house prices down.

      How else are we going to be able to be globally wage competitive, at least if you drop the median house price to 150K then, you can pay people 35K per year and they can still buy a house. And get the minumium wage to $10 or less per hour

      That way we can get away from the stupid death spiral we are in now

      • If we push rates up the dollar will surge up with them, nullifying any gains in global wage competitiveness.

        But yes, $150K is a more sensible price for a small house and if there were plenty like that available then young first-timers would have little trouble attaining ownership.

      • We are in this stupid death spiral because interest rates were not elevated to stop the bubble forming between 2002 and 2006.

        Gutless populism during the Howard years is responsible for this mess.

        • I’d focus on the central bankers, not the PM.

          They are responsible for the monetary mess, the fractional reserve lending causing the tenfold credit expansion between 1990 and 2007.

          • Jesus used a silver coin (real money) to pay tax and also tipped over the tables of the money changers (banks). Lets get back on the gold (or silver) standard and lead the world in real economic prosperity.

  2. It was always thought fingernails on corpses kept growing. We now know the cuticles retreat.

    This is a cuticle retreat.

    Net new mortgages are still negative and Stamp Duty revenue weakness leaves the Baillieu government as animated as my metaphor.

    Don’t Buy Now!

    • Davo, old bean! As a matter of interest, do you own any property – you know, family home or such? I just like to out people’s comments into context, and see if they are like me, and flogged off everything to back the confidence of their views…..

      • I have had three properties (serial), sold up to divorce and now rent a 1.2 mill house in leafy Balwyn, Vic for $30k. I pay the rent with glee.

        If house prices remain level forever, I keep winning and grinning. If they fall a la USA, I buy back in when rent = repayments + 20% deposit.

        • Balwyn callin’, noice…. Thx for the welcome reply. I remain sceptical of those who make similar calls to you, and have ‘nothing to lose’ by doing so…
          “Don’t buy now….!”

        • I pay the rent with glee
          The house probably sold for $30k a few decades back and was paid-off in a few years.
          Now you are happy to pay $30k per year. Can your pension meet the rent rises?

          • That’s one of the skills of life, Claw. Buy low, sell high…. but you know all that. So why aren’t you selling all your properties today?…It made sense to buy at $30k, because all the numbers said so (rent/price etc) but they don’t now. So what’s holding you up, except memories of glorious days gone past…?

          • Hi Claw it was a very different situation back then. Everything changed late 90’s and beyond. What would you do today as a potential FHB?

          • Claw. Let me explain slowly.

            It’s not about paying for rent on a pension.

            You rent today. The rent is much cheaper buying a house.

            You take the difference – often thousands of dollars per month – and invest it somewhere productive. Even a term deposit. This way you can be financially secure, AND build a big nest egg if you want to buy a house when prices return to sane levels.

            You could buy now, but why would you, when you can rent the same house for less, AND save the difference to buy later.

          • You rent today. The rent is much cheaper buying a house.
            You take the difference – often thousands of dollars per month – and invest it somewhere productive.

            Like yesterday you are posting nonsense. I was renting a place for approx $3000 per month where the mortgage would have been $10,000 per month. I can’t take the difference and invest it because I don’t have $3000 + $7000 coming in every month.

          • That’s one of the skills of life, Claw… So why aren’t you selling all your properties today?
            You rich boomers are clueless. I don’t have properties to sell. I don’t even own a single property. Should I buy now or keep being shafted as a renter?

          • But then neither does the landlord, Claw! He’s the one out of pocket by $7,000 per month. Someone loses…and in the current market…it’s the landlord!

          • Claw if you’re only renting something because you can’t afford to buy it, maybe it means you can’t actually afford it, and you should be renting something cheaper?

            (regardless of whether its employment income or retirement income).

            If rents are so high that people simply can’t afford the alternative, it might suggest that asset prices have left incomes behind and an eventual correction is all the more likely.

          • Thanks for highlighting just how insane this country is when it comes to cost of living.

            $3000 dollars rent per month… WOW! That’s more than most people earn per month in The Netherlands!

            I feel for Aussie business and people – how can you ever compete and win with a handicap like that.

          • As per the above posters – Claw, if you’re paying $3000 per month rent and have no money left over to save or invest, rent somewhere cheaper. Your claimed rent is far above the median in any Australian city.

            Do you really need to live in a $1.2 million property? (And if you do – kudos for renting it – the best and cheapest way of doing so and at zero risk in a very shaky time for the property market)

          • the landlord, Claw! He’s the one out of pocket by $7,000 per month. Someone loses…and in the current market…it’s the landlord!
            My landlord inherited the house and collected the $2600 or so per month. How does that put him out of pocket by $7000?
            As to the other genius posters. A typical rent in Sydney is $500 per week. So my rent was slightly higher than that.

          • Claw (The), if you’re being shafted as a renter then buy, for goodness sake. Or pay less somewhere else. That’s what you can do as a renter.

            Also, not counting on a pension to pay my rent, interest from the term deposit (thanks to renting), is paying the rent, for now that is.

            Not one of my friends my age (very well into their 40s), hocked to the hilt, is a head of anything. They are in their minds, I don’t consider owing a bank $600K as ahead, not on their income. That’s just the mortgage part of their overall debt.

            Wait, you were paying $3000/m rent? You wouldn’t be willing to pay $1600/m, and pocket the rest?

            Claw (The), you’re taking part in your own shafting.

          • Wait, you were paying $3000/m rent? You wouldn’t be willing to pay $1600/m, and pocket the rest?
            Claw (The), you’re taking part in your own shafting.

            Rent is closer to $2600. Sure I can find rent for $1600, but cannot pocket the difference due to increased travel and other costs. Have you seen what $400pw gets you in Sydney?

          • Claw, The landlord is still losing! That 1.2M worth of capital is earning 2.5% minus tax, expenses such as council rates & landlord costs etc, with I would say limited scope for capital gains at best.

            That 1.2M could be making $60,000/year minus tax in at call savings with the potential to move that money very quickly into other assett classes based on your assessmnet of risk (not so easy/fast with a 1.2M house unless you make it a bargain by dropping price) , probably not even the best place for it just the first that came to mind.

          • Or retire in Central Europe…. Rent Buda hills in Budapest, 3 bedroom villa with double garage, communal tennis court and pool, AUD1200 per month. May get one bedroom flat in Melbourne for same price

          • GunnamattaMEMBER

            Gents, I can tell you that a villa with a pool overlooking Kyrenia harbour (North Cyprus) would set you back only about AUD 600/month

          • ‘My landlord inherited the house and collected the $2600 or so per month. How does that put him out of pocket by $7000?’

            Um, he’s getting a return of 30K a year on an asset worth 1.2M???

            Why not stick it on the money markets long term!

  3. Failed Baby BoomerMEMBER

    I am in the Davo and Janet “Sold Up Club”. It is not easy – my peers think I am have totally lost it. Nice to have some online sanity and support!

    • Good to hear from others about their actual strategy (sometimes this can be very different to the spoken version!).

      I’m one of those pesky potential Melbournian FHB’s that refuses to become part of the madness. I have easily more than enough deposit, but choosing to sit it out a few more years at least. Still can’t justify why I should give up renting a place bigger and nicer than what I need, to take on a 25 year commitment to a much smaller/older/remoter place at double the weekly cost.

      Not too concerned if I’m wrong and Melbourne residential prices inexplicably surge again… rents would just become even cheaper by comparison and I’m much happier without debt.

      Not buying now! 😀

      • GunnamattaMEMBER

        I came back from Europe earlier this year, took one look at prices and thought ‘I am not buying into this’

        I could buy a place outright. But having the dough in a bank and earning interest more than enough to pay rent makes far more sense than buying.

        One could suppose that if it is RBA and government policy there is the chance prices could rise…..

        But I look at average debt levels, the competitiveness of almost everything actually done in Australia, and the global outlook…..

        Then I look at the drip feed of job losses (another 250 or so at Avalon yesterday) – real losses rather than checkout chicks at Bunnings or coffee makers

        and figure that at some point either the AUD breaks (and I admit there is no sign of that now) or RE breaks (presumably following some sort of external shock and unemployment sending a chill up the spine of the punting masses)

        Not buying now

        • Here’s the most wonderful thing you have going for you, G. You can afford to be wrong! If you decide ” Bugger it! I’d better buy…” You can – today, tomorrow or next Thursday. But those who have property can’t afford to be wrong. If they are they won’t be able to get out….you ‘aint gunna to buy from them…not at their price, anyway. So the smart cookies are those that are taking whatever chances are given to them, right now, to get out whilst there is a market of sorts for them to get out into.

          • That’s the best way of putting it I have seen so far!!

            Great words Janet. I can afford to be wrong! Love it!

          • +1

            FYI I sold my house in 2009 and have been happily renting since. I did miss the price rally of the Rudd stimulus, but then I also missed the dead money paid in interest to banks over 3 years. My calculations have shown me to still come out ahead by roughly $30k so far…

          • dumb_non_economist

            I’m in the same boat as Gunna, but I don’t see it as “affording to be wrong.” I’m giving myself 3 more years and the worst that can happen is that RE will tread water and by waiting I’ll have lost very little, buy now and if it goes bust I stand to lose big time.

          • Exactly, me too.

            All the risk is on the buyers.

            The risk in waiting (and saving) is basically nil given the current weak market.

          • Same here! 🙂

            Not in the league of Gunna.. but 30% deposit easy for decent abode and the repayments would not be over 25% of our income.. but I would not be swimming in debt yet because I would rather be in “afford to go wrong” compared to “CANNOT AFFORD TO WRONG” position which puts a SHITLOAD Of stress!!

        • My wife and I have been on the sidelines for the past 4 years.

          We get the same comments from friends and family that we should be responsible and lock ourselves down in housing debt.

          However, even my real estate orientated parents (baby boomers) have changed their tune over the course of this year.
          At the given AUD levels, my dad has gone on to say ” hold off on the house and invest in gold bullion, just in case…”

          • ….and if gold goes the way of currencies, stocks/shares, property-what then?!
            Forget the gamblin’ approach.
            Spend the cash now on something ‘valuable’ for the near & far future. If you can’t work this one out you don’t deserve to eat.

          • rasberries
            One can always buy bullion and short the index at times. It is a currency & inflation hedge IMO but I suspect it could have a nasty correction too, particularly if anyone decided to leave the Ez at some point.

            Hard to find too many things that seem “valuable” at the moment. What do you consider valuable?

        • I asked my wife a simple question – what forms the majority of loans given out by banks – business loans or mortgages? She was really surprised when I said 60% of bank loan books are stuffed with mega mortgages.

          Don’t buy now and keep well away from the merchants of debt.

          • GunnamattaMEMBER

            ……..and that goes to the nub of why the govt and RBA are so keen to have housing construction pick up as mining recedes (to the extent that it does).

            The banks are stuffed if there is a hit to either their funding side, or their asset side (the mortgages).

            Personally I dont see how they can avoid doing something about their ridiculous over exposure to mortgage lending over the longer term, but it appears to be their policy now.

            For sure that will make the status quo seem more rigid – price inflexibility, not going down when they should. But I also reckon it means that when the jolt comes the jolt will be bigger and more sudden simply because the system has been gamed to be more brittle.

            Its just a matter of waiting.

          • I asked my wife the same question. She is now convinced I am spending too much time reading macrobusiness and suggests I should start spending more time on pron sites. This led to further discussion as to which of her friends she would most likely have a threesome with. Not the one I was hoping for, as it turns out, but a promising possibility. This crazy property market just might help save my marriage.

          • GunnamattaMEMBER

            What a great concept – I might see if I can get my Mrs her friends and some of mine and her friends to sit around in the buff and talk economics – maybe with some booze and light spatial discombobulants.

            Bloody great idea!

      • My wife works for one of the Big4, and she tells me she regularly cops the “do the right thing and put your money into a home”.

        • TheRedEconomistMEMBER

          Agreed Tan Man…

          I am in the same situation…

          My wife is dead keeen to buy a home for our young family.

          We have owned previously and bought at the peak in Sydney in 2004.

          We were willing to take a loss on it in 2008 and did, because prices had retreated in the location I wanted to live in004, but could not afford.

          So sold further the house for a $40K loss, to buy in 2008 in an area which had dropped by $70k at it peak.

          But just as we found a place another little one came along, and we have rented ever since.

          In that time, since 2008/09, I have saved $100K, whilst renting, whilst house prices have risen till 2010, but fallen in real terms ever since

          I cop it all the time, “you got to buy now” from colleague, whom dismiss my numbers and think they are smart vegemites because there innner city area is alway going up.

          When I celebrate when interest rate are staying the same, or a fall in prices, they get annoyed.

          Does not stop them mentioning all the time that they bought there place for X… and now it is worth X + $100K frequently

          Even last night my wife said, “We should look at a new listing, as we do not want to be priced out of the market.”

          Where did I hear that before … Yep 2004.

          With interest rate lows… we could do it… but it would only take a trip to the dentist or call or to plumber… and I could be give the keys back to the bank.

          • I keep the spouse rumblings at bay by renting a very nice house –

            – and reminding the +1 regularly that the houses we can afford to buy would be LESS comfortable AND STILL more expensive per month.

            As long as our savings are growing and the house is comfy, I think the pressure can be withstood.

          • Mining BoganMEMBER

            These stories are like those scary movies where the terrifying phone calls come from INSIDE the house…

          • TheRedEconomistMEMBER

            Jack… And how has that 10 months been?

            I am just worried I will be up to dect in the eye balls… and having to extend further when the bathroom or roof leaks.

            Mining Bogan… Yes these conversations play out regularly in Sydney households… and many marriages do not last due to it.

            Why worry when you can just refinance!!!

          • Yes these conversations play out regularly in Sydney households… and many marriages do not last due to it.
            Can someone add that as an entry in the rent/buy calculator?

          • Arrow2,

            My strategy also. In fact we are moving to a slightly bigger rental as my family is getting bigger. A definite plus, compared to friends of ours that bought (before they had kids) and are still stuck in a 2br box with 3 kids under 5 (glad it’s not me, for shurrrr)

          • its been Ok but i can see the storm clouds on the horizon, ie when we need to replace cars, help kids etc. The new house is good close to ammenities the kids love it etc, my wife keeps saying its a lifestyle decision etc, but i also know whilst we were renting for the time we did the interest on our dough was offseting the rental costs even after allowing for tax and we were saving and we had freedom, good holidays etc.

            Its all the other crap that comes with home ownership, building insurance , rates and maintence, particular when you were last in line for handyman genes.

            Women tend to be more socially concious of the renters are loosers ideaology i think, and yeah i can see why divorce, depression etc rise when people are under financial stress.

          • TheRedEconomistMEMBER

            Agreed Claw on the Rent/Buy Calculator thing..

            When the new owner start to realise they cannot keep up with the minimum repayments, they decide to take on that second job just to put food on the table.

            6 months later the lovely wife eyes start to wander cause Hubby is never home.

            That is why the divorce rates are spiking in North Western Sydney.

            In the end … all that toil is hardly worth the right to be able to put a screw in the wall.

            Pardon the pun.

    • Failed Baby Boomer, we are also baby boomers who sold when we thought it was the top, just before Rudd’s stimulus came into effect. I agree it’s not easy especially in Australia where anyone who doesn’t have their own property is considered a loser. Not only that, but nearly everyone we know has several investment properties as well. Of course they bought years ago, and even if prices crash they won’t go back to 1980s or 1990s levels – the government will make sure they bring in more people to keep those prices high. But I am not going to buy back in now; not in my area and at the prices they are, despite minor price drops.

  4. Quick question. Why do mortgages discharged move in such lock-step with mortgages lodged? Surely most mortgages discharged originated long ago and therefore the month that they are finally repaid in full should have little relationship with the number of mortgages originating that same month…. Am I missing something?

    Is it as simple as once banks are repaid, they have room in their loan books to take on more mortgages? If so, is loan repayment rather than mortgage demand driving the change in mortgage originations over time?

      • peoples are gettin’ 2nd mortgages+++. Big buck earners are borrowing more & more & more…..& the Big4 bastards are rubbing their hands together & drooling at their big piles of mortgage slips….revelling in the ‘ruffling’ sound made when they ‘flick-flick-flick’ them through their fat fingered grasp……same thing went on 2008, just before the GFC I remember having a convo with our bank asking if we’d like to borrow-get this- ONE MILLION dollars?! My response was, “WTF do you lot know about ….that is about to happen that we don’t know about??!….” no answer. Then I asked” How the hell would we afford to pay that back if rates went up OR the property market went down?” no answer again.

        DON”T BUY NOW!……sell up 2nd 3rd properties NOW!

    • Liu MianzhiMEMBER

      I wondered the same thing.
      I suppose in most cases throughout your working life, one mortgage is replaced by another (selling/buying when upgrading; refinancing). So perhaps the gap between lodgements & discharges specifically reflects the broad demographic trend, namely the difference between the 30-ish(?) year old FHBs and the group finally clearing themselves of debt (50-55-y-o?).
      If that is correct, then I am not sure that it will necessarily tell you too much about the housing market, because the latter group are not actually exiting the market for housing, just exiting the market for debt.
      But it may well be a strong leading indicator of bank profitability: In the short term it will not impact much because the new entrants are at peak debt, whereas the final balance on those discharged was probably minimal. But if the trend continues and the reduced numbers feed along the loan book, bank profits will suffer badly.
      So…don’t buy (bank shares) now?

      • The conundrum is that despite numerous reports of the big4 demise, those chunky dividends just keep on coming

  5. Does this surge coincide with the closing of a First Home Buyers Grant program? I know somewhere (Canberra?) recently had one close and there was a surge associated with it.

    Else (IMHO) this is just a dead cat bounce. Sometimes the bodies hit the cliff face as they fall, don’t you know!


  6. Australia! Do not let this happen to you “The median house price in New Zealand rose to a record last month as sales jumped by almost a third compared to October 2011…” NZ engineered a fall of 11% in the median price 2 years back (The Governor of the RBNZ told us back then ‘to stop borrowing’ and rammed the OCR up to 8.25% to ‘help’) but we have let it slip away. It was so hard won, that it can only mean the country is in a shocking financial state to have to go back to sustaining our ‘wealth’ by relenting on debt assumption by our people. And, yes, no one foresaw the Christchurch earthquake that collapsed our OCR back to 2.5%. But you are better and bigger than that. Hang on to you property adjustments. They are too hard to reverse if you let them slip.

    • We Aussies would like to think we are, but we aren’t. There’s always an idiot Australian who can find an idiot bank to fund their ‘but look how cheap it suddenly is after that price fall!’ mentality. Happens even more with shares than property…

      The RBA also wants housing construction to fill the mining void. More gambling-promoting-savings-punishing market distortions are inevitable and probably not far away now 🙁

  7. How much longer can they hold up this house of cards?

    another 1, 2, 3, 4, 5+ years … my patients is wearing thin but my savings are growing.

    Damn RBA reducing my return!

    What to do?!