Victorian transfers & mortgages decelerate

By Leith van Onselen

The Victorian Department of Sustainability & Environment (DSE) released transfer and mortgage data for the month of November, which shows continued weakness in the number of housing transfers and finance commitments.

First, below is a chart showing the rolling annual number of housing transfers from November 2002 to November 2012:

According to the DSE, the annual number of Victorian home transfers fell slightly over the month – from 169,875 in October 2012 to 169,650 in November – which is the second lowest level reached in the series’ history and 13% below the 10-year average level.

The DSE’s mortgage finance statistics are unique in that they provide data on both mortgage lodgements (i.e. new mortgages) and mortgage discharges (i.e. mortgages repaid in-full). Below is a chart showing both series on a rolling 12-month basis:

And below is the number of net new mortgages created, calculated by subtracting mortgage discharges from mortgage lodgements:

According to the DSE, the number of mortgages lodged in the month of November was identical to the number of discharges (both 15,198). On an annual basis, however, the number of mortgages discharged (190,553) continued to exceed the number of mortgage lodgements (188,648), meaning that -1,905 mortgages were lost in the State of Victoria in the 12-months to November. This compares to the average of around 12,900 annual net mortgage creations since the series began in 2002.

And below is a similar chart showing that the ratio of mortgages lodged to mortgages discharged:

Between 2003 and 2005, there were around 11 mortgages created for every 10 mortgages discharged. In the 12-months to November 2012, however, the number of mortgages lodged has slipped just below the number of mortgages discharged, indicating that Victorians might be deleveraging.

The data also suggests that the Victorian (Melbourne) housing market remains fragile, which is supported by recent weak new home sales and house price data.

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.

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  1. This is a major, unrecorded, unremarked social and economic trend. The behavior of Victorians and particularly Melbournians, where the greatest rise in land values happened, is a turning away from mortgage debt and points to a significant deleveraging era if taken up by the rest of Australia.

    House prices can’t rise without a big debt appetite. Many have learned (the hard way) that heavy borrowing is not the way to build their personal balance sheet.

    Don’t Buy Now!

    • David,
      I think your by-line was best said until mid-2010, when every man & dog were piling in.
      House prices are definately falling now in aggregate terms, and at a fair lick in some parts of Melbourne.

      As a recent purchaser of a house with repayments less than my rent, I would suggest the by-line should now be something like ‘Get Prepared To Buy Soon’.

      • Congratulations, Friend7 on mastering the rent/buy equation. My advice to fellow citizens has always been to prepare for the personal moment of choice in homebuying by saving a big deposit, having clean credit and stable employment.

        I still think a major repricing exercise is ahead of us and I want the excluded to be ready for that.

        May I ask your postcode? The rent/buy equation remains negative in almost all of the country, and this may prove instructive.

      • “As a recent purchaser of a house with repayments less than my rent”

        What % of the purchase price was your deposit?

        IMO ‘Get Prepared To Buy Soon’ is still a good couple of years away yet and there will be little need to be timely with the purchase…

      • Also interested where – can’t really find anywhere safe and desirable in my city this would apply to. Congrats if it was a genuine bargain 🙂

        House prices are still falling but rents seem to be coming down too, even in Melbourne’s Glen Iris.

        • Here it is. Not a desirable location for most. The tide is definitely going back out, and suburban locations like this notice it first.

          The final price was less than that shown by a decent amount. 20% deposit put down. Running the numbers, it beats renting over my planned holding time even if it falls another 20% in price.

          • Thanks, and well done on getting the math in your favor. I had a friend who rented in Wyndham Vale and she liked it. Not as much demand out there, but when most of the demand is coming from rich Chinese immigration anyway, I guess that can arguably be a positive.

            It costs a ridiculous premium to live east of Melbourne, I’d definitely be considering north or west if I was planning a big family 😀

          • dumb_non_economist


            I’m curious as to what your holding time is. Lets say you got the place for 300k which is close to 20% off, to lose another 20% is 60K. So you’re better buying this place than renting in 3024 by 60K, not including your buying and selling costs??

          • You are being more self-revealing than asked, Friend7, so I did some sums for you.

            According to, Wyndham Vale 3 bed rents are 250-300 pw, highest $340pw. Your purchase (Congratulations!) looks above average in quality, but the market wont offer you much of a premium, so $340 or $17,680 pa.

            If you bought at a discount – average disc is 7% so let’s presume 10% – for $332k on a 20% deposit, the numbers look like this:

            Purchase price 332
            Stamp duty 13
            Conveyance 1
            Mortgage fee 2

            Total: 348k

            20% deposit 70

            Mortgage 278

            1920 pcm over 25 years @6.75% = $23040pa You will also be liable for rates, insurance, repairs, etc.

            So I am sorry, but on these generous back of envelope figures, you would be better off renting. I also ignore the opportunity cost on that 70k deposit.

          • Oh that’s a little bit naughty David. Firstly stamp duty and fees total $12,317 and not the $16,000 that you have allowed in total. Nil establishment fee loans are available, and none are anywhere near the $2K that you allowed – usually just a few hundred at the most.

            To allow for the opportunity costs,I prefer to do the calculations as though it was a 100% loan, that way the deposit is being assumed to earn a commercial return.

            So what would the cost of a loan of $332,000 at the current rate be. Let’s assume a real market interest rate of 5.5% instead of your out of date rate of 6.75% – then the interest cost is $1521.66 per calendar month, or $351.15 per week, which I is almost identical to the rent that you deemed would apply on this house. Friendship7 advised us that his cost is less than renting, so I’m willing to accpet his word on that given that there is indisputable evidence to support his claim.
            The house looks great and quite new, so maintenance costs should be low, add in some rates and I don’t see any issues for the buyer. In a few years as his wages grow, he will be even further ahead.

            His repayments will be $2039 per month, but that includes a reduction in principal of $500 every month, or $6000 pa which will accelerate in a few years times.

            Of course his repayments will only $1631 pm on the loan taken, and not what I have allowed above, with real interest costs below $300 per month.

            Well done Friendship7.

          • “…as his wages grow…” What was, won’t necessarily to be…for all sorts of unknown reasons.

          • I won’t to lay my entire financial situation on the table for all, but David, if you redo your sums assuming 5.5% and compare the result to my present rent of $530pw you can see why this decision was a no-brainer.

          • I smell a rat in the math. Show us the numbers that exhibit you are better off than renting, even though you have the following to contend with(where relevant):

            – mortgage repayments (P&I presumably; not just interest only loan);
            – council rates and taxes eg emergency services levy;
            – utility bills and connection costs eg electric, water, gas, phone;
            – strata fees;
            – building and contents insurance; and
            – maintenance and upkeep of the property (pipes break, house needs painting etc).

            Further, given you just bought, add in the following:

            – government fees: including land transfer registration fees and government taxes;
            – stamp duty;
            – mortgage insurance;
            – legal fees;
            – inspection fees associated with the house (building, pest etc);
            – moving costs and other miscellaneous factors.

            I highly doubt that if you include these variables (which cannot be avoided), that you will be better off than renting.

            Plus, you expose yourself to the possibility of large falls in house prices as the bubble continues to unwind, landing yourself in negative equity quickly with all the other housing mugs who bought in the last few years.

  2. I might be reaching here, but is there a correlation with reduced mortgage debt and the sharp increase in car sales? Are potential real estate investors ‘treating’ themself to a new motor given property hasen’t fallen as much as some hoped?

    “Australians treated themselves to 98,700 new cars last month, up 11 per cent on the same month last year and up 7 per cent on the previous November record set in 2007, the first time 1 million annual sales were eclipsed”

    • As a random opinion, people might invest in a new car if they think ‘own reliable transport’ might increase their job seeking chances in this tough environment. I know someone who made that decision recently (for better or worse).

      • darklydrawlMEMBER

        Dunno about you, but if I was seeking a job I wouldn’t be blowing cash on a new car – of course, the dude/dudette in your example may not be cash constrained despite seeking work so perhaps it is a moot point.

    • darklydrawlMEMBER

      Hey Winston,

      Could be, but I was watching live commercial TV the other day (something I rarely do these days – if I watch at all it is all PVR’d so I skip right over the commercials) and was shocked at how many adverts were hocking cars for “Zero % finance, Zero deposit”.

      Now I am sure the devil in the fine print has some caveats and rude surprises, but prima facie it was all ‘Go! Go! Go! – Drive away today, nothing to pay’ kind of stuff.

      I did think at the time, “wonder if that is why car sales are so high?”

    • “How does 0.5% vehicle finance really work?
      Before you sign up for one of the vehicle dealers low interest rate offers you need to know the following:
      The price of the vehicle is generally not discounted so therefore in most cases you will be financing a greater amount than what you may have negotiated without using the dealership finance. The term will also be restricted to either 36 months or 48 months and in some case a deposit maybe required.
      Example: RRP:$30,000.00 with claimed rate of 0.5% over 36 months would be $840.00 per month.
      Negotiated price: $26,500 ($3,500.00 discount) using your own finance, payments would be $825.00 per month over 36 months.”

      This is how low rates on car finance works.

  3. The stats you have quoted do not (or at least do not necessarily) indicate deleveraging.

    Many mortgages are discharged on making the final monthly payment of say $500 (on a mortgage taken out 7, 15, 20 or even 25 years ago. Most new mortgages will be for somewhere between $100k (substantial renovation of kitchen, bathrooms, new carpet, paint and maybe a family room) and $300k to $500k for a first dwelling or to upgrade dwelling size.

    Delveraging is based on size in dollars, not numbers of mortgages.

    And as pointed out in another comment, add in net car loans and credit card balances before claiming deleveraging.

    • Consider three people, all with $20k left on their $100k mortgages to repay. Two of them pay it off, the third re-mortgages and updates their house.

      In terms of number of mortgages, we are deleveraging. In terms of total credit, mortgages are growing.

      The data above doesn’t stipulate either way, and I think UE is well within his rights to state the behaviour is possibly deleveraging.

  4. Leith,
    Sincere thanks for these graphs. People are fed up with massively overpriced real estate in Melbourne, the second highest in the world after China.
    The RBA started the property bubble by keeping interest rates at historic lows from the late 1990s, allowing people to borrow way too much. Its performance is shameful.
    Now the RBA is smashing everyone who has money in the banks, forcing them to consider more risky places to get a reasonable return on their money. So our reply will be: “Fu k you RBA I ‘aint going to spend my money anymore, you Bastards.”
    Property prices are heading down.

    • thomickersMEMBER

      yeah they reduced my interest income which would have allowed me to spend more on Christmas gifts.

      • Yep same way I look at it. I don’t care if they lower interest rates to 0.000000025%, I’m not taking on a mortgage or credit card debt. Its a broken system and I want to be holding significant savings whether the inevitable correction is slow or fast (the latter would be better).

      • darklydrawlMEMBER

        Now this is a really good point. I am always stunned when the MSM keep banging on about “Good news – Interest Rates Down!”.

        That is only good news if you are up to your armpits in debt. For any self funded types, this is bad news and is likely to curtail their spending power, but the MSM never seem to care or understand there is more than one side to the interest rate story. Idiots.

  5. I wouldn’t be surprised if Victoria leads the way on a deleveraging ( or at least a price melt).

    The memory of the pyramid building society does seem to be etched into the consciousness of the state, and notwithstanding some cavalier behaviour from recent city arrivals and the younger generation, the boomer speculation game did appear to have a greater nervousness about it – a bit more of a memory about what happens when thing go wrong.

    This twitchyness might lead to a faster capitulation in prices.