Housing finance beats expectations

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By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of February, which registered a seasonally-adjusted 2.0% increase in the number of owner-occupied finance commitments over the month. It was the first increase in owner-occupied commitments for five months and beast analyst’s expectations of a 1.5% rise. January’s results were also revised upwards slightly.

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Arguably, the most important figure in the release is the number of owner-occupied housing finance commitments excluding refinancings, which registered a seasonally-adjusted 2.0% increase over the month of February, but remained some -5% below the five-year moving average level.

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The series was also up 6.8% on February 2012, but below the levels of mid-to-late 2012 (see next chart).

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First home buyer (FHB) commitments recovered slightly, recording a 2% non-seasonally adjusted gain in February (see next chart), but represented just 14.4% of total owner-occupied commitments, which was the lowest level since July 2004.

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Unfortunately, the ABS only provides the value of investor finance commitments. These were up by 2% in February, by 15% over the year, and were at the highest level since February 2008, suggesting that investors are driving the lion’s share of the growth in housing demand and prices at present (see next chart).

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Overall, it’s a decent result that reversed some of the weakness experienced in the owner-occupied segment, and solidifies the run of gains in the investor segment. That said, mortgage demand remains weak amongst FHBs, which could weigh on the overall housing market later this year.

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Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. Investors who are leveraged have nothing to lose. You may as well lose ten houses than only two when you’re speculating with borrowed money. No wonder investors are driving the lion’s share of the growth in housing demand and prices at present–we all know it is the prudent saver who will be punished in the end as they are the only ones with something to lose.

    • Take your $AU savings, convert them into $US and hold for a year or two – you won’t lose a cent, in fact you’ll probably make 20%.

      • Already doing this, might as well borrow our overvalued currency as well to invest in O/S assets.

        Friend of mine has been talking with his bank about a mortgage, without signing anything last time he logged into his bank he found offset account loan account and a credit card he never asked for magically appeared. People throwing money around, all you need to do is know how to find and invest in (even partial) value.

      • Feels like I’m on the Titanic. Fortunately I’m not in economy class with the Irish, Portuguese, Italians, Greeks and Spanish. Knowing, however, that there are not enough lifeboats for everyone and how the super rich global elites will be first to save themselves along with a few poor women and children thrown in for good measure somehow doesn’t give me much confidence.

        Yes, I agree the $AU dollar will most likely drop like a stone and the $US will be the last to fall but in the end the ship is going down. On a more cheerful note, we all have to die eventually and right now the sun is shining and life is pretty damn good.

    • Fact….Mortgages are always going to be at record highs, after all inflation makes sure that peoples wages, petrol, cement, land, insurances, taxes, council rates etc etc keep increasing in price, it use to go up and down but governments now will make sure we dont have deflation no matter what the risk and they will try their damnest to make sure deflation doesnt occur.