Housing finance falls again on FHBs

The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of January, which registered a seasonally-adjusted -1.5% decrease in the number of owner-occupied finance commitments over the month. Analyst’s had expected growth of 0.2% over the month. December’s results were also revised downward.

Arguably, the most important figure in the release is the number of owner-occupied housing finance commitments excluding refinancings, which registered a seasonally-adjusted -1.9% fall over the month of January and remains some -8% below the five-year moving average level (see next chart).

The uptrend that had been apparent since February 2012 has now receded, with the series now declining for four consecutive months and -0.8% lower than January 2012:

The fall in owner-occupied mortgage demand appears to have been driven by another big drop-off in first home buyer (FHB) commitments, which fell by another -11% and represented just 14.9% of total owner-occupied commitments in January 2013(see next chart).

Unfortunately, the ABS only provides the value of investor finance commitments. These were up by 4% in January and by 19% over the year, suggesting that investors are driving housing demand and price growth at present (see next chart).

Overall, it’s a fairly weak result that suggests that the mild momentum in mortgage demand that had been building since early 2012 continues to lose steam. Mortgage demand is being driven predominantly by investors, with FHBs seemingly abandoning the market en masse.

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Leith van Onselen


    • General Disarray

      I’d prefer to think FHBs have stopped taking on mortgages because they can do basic math.

      • Consider most first home buyers do not have the job security of their older cohorts. With the opaqueness of the employment statistics who knows what level of job security someone younger has these days.
        If housing truly is a ponzi scheme this is the definition of what will cause it to fail. (not saying it is or isn’t stranger things have happened than the housing market holding up rather than breaking at this point)

        • I know young engineering grads are having trouble getting placements. Tough for them at the moment, – they would be some of the potentially big-earning FHB demographic, IMO.

      • tsport100MEMBER

        You’re right, the maths doesn’t add up.

        Investors have equity, rental income and negative gearing to put in the + column.

        FHBs need to have saved a 20% deposit (north of $100k) in CASH to even qualify and then need to convince a bank that a single income will cover the payments for the first decade… (without the broker having to fudge the numbers after the contract is signed!)

        FHBs need to wait for the ponzi scheme to collapse and buy during the great boomer sell-off.

    • If his is right, then I hope the situation continues for a reasonably long period.

      That way the speculators who have previously benefitted from and contributed to the inflation will be the ones to cop it on the way down.

    • That’d be fairly close to the truth. But to see the rate dipping below zero, now we are in Keen land and decelerating mortgage growth.

      That’s something Peter Fraser yesterday said wasn’t happening. Nothing like ignoring facts to help the ponzi roll ever on Peter…

  1. GunnamattaMEMBER

    This data is traveling in completely the opposite direction to the REIA house price increases – which presumably would have punters at Martin Place looking at a rate increase if continued.

  2. It is really remarkable that the housing industry is struggling for a pulse even thought the RBA have really cranked the dial on the debt defibrillator towards the red zone (ZIRP).

    When an industry with such constipated supply issues and plenty of demand pump priming via migration and foreign investment is comatose one doesn’t need much imagination to conclude:

    1. Additional rate cuts are not likely to help much.

    2. The land supply reforms slowly working their way through NSW and other states are not likely to help.

    3. Growing weakness in employment will turn off the migration tap.

    That just leaves the old stand by – home buyer grants to get the old mojo

    • 3. Growing weakness in employment will turn off the migration tap.

      That can always be fiddled with.

      Remember the miners who got sacked for doing the Harlem Shuffle 2 weeks ago?

      I comlpy with a business setting their own standards, but jeez, labour mustn’t be that scarce if you can sack so many so quickly without a warning.

      • Mining BoganMEMBER

        They just go to another mob. It’s amazing how many of my fellow bogans there are who have been sacked from other companies. General stupidity reasons too.

        “What happened to Davo?”
        “Got the boot.”
        “Yeah? Whadidedo?”
        “Got caught having a race with another haul pack.”
        “Yeah? That’s bullshit.”
        “Yeah, no worries but. Scored a start with FMG.”
        “Yeah? Wot they payin’?”

    • Boomers don’t need to be smarter to win the game.

      They’ve got the political class to pander to their desires.

      Boomers have never paid their own way, they’ve been net beneficiaries of the welfare system ever since they were born. They’re not going to start paying their own way now.

    • They may not be “smarter”, but simply have different ideals and perceptions about the world.

    • I think part of it could simply be that the biggest cohort of people forming new households – roughly speaking, people born in the late 1980s – are less interested in home ownership, and more inclined to rent.

      • You reckon! The poor suckers have got an M&D hammering into them “Property always goes up son. If I had may chance again I’d a bought 100 houses back in ’75…and I’d be rich today…Rich I tells ya. So don’t be a mug and miss out like I did. Get in there and buy anything and everything you can, or even can’t, afford… Because I tells ya, Property always…)

    • I think people here are giving too much credit to FHBs being smarter than they are.

      Stand outside your favourite city office and pick out any number of young/graduate corporate workers (the ones who can afford to service a loan). Unless they’ve been touched by the great Collyer, most of them will tell you FHB grants help affordability and that they will buy as soon as they’ve saved a minimum deposit, even if it meant sacrificing over half of their of net pay towards minimum repayments.

    • “smarter” yeah right LOL, this is just silly talk.if FHB could afford to buy they would, no question but for many they are not in the situation to get 50k aside + safe job/relationship etc…

      don’t kid yourself, if investors have such a good time with no competition at this moment, it s not thanks to FHB neurons but wallet.

      • I tend to agree with that, most people still talk that way that I know. Can’t really converse with them regarding the income shock that is coming later this year without them glazing over and saying some kind of Ralph Wiggum-like statements that property always goes up and such.

      • I wouldn’t be to sure about that dam.

        I think that property bulls have a mind-set that doesn’t really factor in that they might be wrong on property – it is the nature of their mindset.

        First home buyers know all to well from their peers that after the Rudd GFC – first home buyers boost (Vendors boost) they were left with negative equity when the tide when out.

        Investors know that they need the money coming up from the next layer buyers using their cash from the FHB to make their gains – if this doesn’t come the 3% yield is not so crash.

        The FHBers don’t need to be the chumps of the investor/speculators.

          • You are kidding pete? I’ve got relatives in north Qld that are still under water from the Rudd f.k over – prices in fnq are still below the Rudd screw the kids prices.

            Shame shame shame

      • I do love investors who celebrate the fact that more and more people are being priced out of the market. Don’t you know markets always go up when fewer and fewer people can afford to buy?

        So are house prices going to increase slower than incomes in the future, or is the potential buying market going to get smaller and smaller.

        • Investors are backing rate-falls or low rates and pricing power on rent as the mining story unwinds.

          I’m backing violent uprising against rent-seekers by the next generation who go marching through sydney with Abbott and Gillard’s head on a stake… that and rising rates because the aussie dollar collapses 😉

  3. With the withdrawal of certain grants maybe FHB are acquiring their first home as an investment property to access tax savings…?

    Perhaps this is adding some fuel to the growth in investment loans.

    • You mean Young A and Young B and Young C buy properties that they cross-rent to each other? Now that’s a new one ( to be read with a sarcastic tone!)

    • Most FHBs would still qualify for the State-based 1st home owner grants.

      I know quite a few who are choosing to rent out their places, but only after they have lived in it for a few months, to obtain the $7K grant.

      So they’d still be captured in the FHB figures.

      • And when they rent them out and claim the loss from the mortgage interest they are telling the ATO that the properties are not principal place of residence and they will therefore open themselves up to capital gains tax if there is one.

    • drsmithyMEMBER

      With the withdrawal of certain grants maybe FHB are acquiring their first home as an investment property to access tax savings…?
      Indeed. Save some tax just to pay that money to a bank in interest.

      Some people just don’t think their cunning plan all the way through.

      • Haha it’s hilarious – I call it the goverbank – doesn’t matter if its the government or the bank you are still handing over the are earned!

  4. I live in the Hunter Valley, and in a particular little place that is an investment property haven.

    Around here, house that have been on the market for 4+ months are now selling like hotcakes. There are more “For Lease” signs now, but even some of them are filling.

    But you gotta understand – this area is in trouble; the mines are not spending anything like what they were, such that mining services are feeling the pinch. Some of the mines are in complete cost lockdown – only what needs to be done to continue production, gets done. Just about everything else is off the table.

    So, why the big bounce in sales? I can only cite belief, unless I am missing something?

    My 2c

    • Boomer are behaving like trained monkeys. Twenty years of debt expansion and rising property prices will do that to most people.

  5. Oops – first home buyers got screwed by Rudd when he pump primed the construction sector after the GFC.

    Maybe the current tranche of fhbers doesn’t want to get played for chumps like the last lot as the politico- housing complex tries to turn them into debt serfs.

    Good for them.