Housing finance launches but FHBs still MIA

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By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of March, which registered a seasonally-adjusted 5.2% increase in the number of owner-occupied finance commitments over the month. It was the second consecutive increase in owner-occupied commitments and beat analyst’s expectations of a 4.0% 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 7.2% increase over the month of March to be tracking 2% above the five-year moving average level.

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The series was also up 13.8% on March 2012 and was the highest reading since December 2009 (see next chart).

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First home buyer (FHB) commitments recovered somewhat, recording an 11% non-seasonally adjusted gain in March, but represented just 14.2% of total owner-occupied commitments, which was the lowest level since May 2004 (see below charts).

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Unfortunately, the ABS only provides the value of investor finance commitments. These were up by 2% in March, by 21% over the year, and were at the highest level since January 2008, suggesting that investors have been driving much of the growth in housing demand and prices (see next chart).

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Overall, this is a very bullish result that suggests lower mortgage rates are finally starting to have an impact on mortgage demand. The RBA will also be pleased to see the big rise in purchases of new dwelling finance. There is some risk the figures are boosted by Easter seasonal adjustments and demand remains weak amongst FHBs, which will eventually weigh on the overall housing market.

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  1. Apparently, the stats are showing increasing loans for new builds.

    Phew, a breather there for RBA’s Chris Kent.. but not for long, not with developers fleeing the urban fringe and trying to get rid of their impaired assets.

    • Unfortunately, the solution is likely to require a few developers going bust.

      That is the only way the land will get back on the market without the burden of the original purchase price hanging over it.

      New developers can enter the market and buy the land and assets of the ‘creative destructees’ cheap and then undercut the remaining existing players with lower cost house and land packages.

      That should fit in quite nicely with the stated desires of several state governments to get the land supply pipeline moving.

      Reducing the cost of land and housing will not only free up income for more productive purposes but the process of building new supply will itself stimulate economic activity.

      The RBA will just have to get used to the fact that protecting the asset prices it drove up with its easy credit policies over the last 17 years, is something the country can no longer afford.

      • I agree. We are a couple of ponzi business cycles away from land prices reverting to their mean value.

        The listed developers will no doubt dump all of their impaired land bank assets and hive it off into REITs, which will then be sold to the unsuspecting grandma(*) as a high yield, risk-free security. Now, you can’t have the big end of town absorbing all of the losses for overpaid land, can you!!

        (* Financial repression by RBA will smoke out the necessary number of greater fool grandmas out of their term deposits).

  2. Perhaps this shows that investors really are happy buying and selling to each other. But the real question is whether it’s really sustainable.

  3. I get the feeling we are close to game over for the property market, the tipping point. Economic downturn in Europe and China will have the overrideing say in our property market, not the reserve bank.

    All the misallocation of resources that has occured under our mindless monetary policy set by the RBA will be flushed out. I get the feeling the misallocation is now trying to correct itself (most other industries except housing are getting smashed, it won’t be long before housing follows as unemployment means no money for the mortgage).

    • BubbleyMEMBER

      Unemployment is the figure that matters to me.

      Aussies will go without holidays, fun or food for their mortgages.

      The unemployment rate at 7.5% is what I’m waiting for.

      Then things are going to get messy.

  4. Wow Looks like it’s the time to buy!

    If we FHB’s can get on at the ground level we will be in clover in just a few short years. I can’t wait for my term deposits to finish in a few short months.

    I hope our $AU stays high, if it doesn’t then the overseas investors will price me out of the market, it’s hard enough to compete with the Chinese millionaires as it is. Though they aren’t really millionaires they are just holding on the perceived capital from their ponzi property bubble. They wouldn’t be able to bring that diseased property investment mentality over here surely?……

    • I think the inflow of hot money pricing us out of property is one of the causes of the high dollar.

  5. “Overall, this is a very bullish result that suggests lower mortgage rates are finally starting to have an impact on mortgage demand.”

    You would think so unless you already knew April house prices fell 0.5 per cent.

    So looks more to me like investors shot their bolt in February and owner occupiers shot it in March, along with a few grasping first timers.

  6. We are off to the races – open homes I went to on the weekend were smoking.

    Who would have thought cheap debt would get people gambling again – bull trap or not bull trap on the ToT?

    • That’s right, aj. Whether or not anyone agrees with reinflating the housing bubble as the best strategy for overcoming a deflating mining boom, there’s little doubt that the prolonged period of low and falling interest rates is encouraging people to pay higher prices for housing. I don’t see it as a boom at the moment though – more like a brisk walk.

      • I would rephrase that as being a “Risk Walk”.

        Low rates mean bugger all when you havent got a job / income to service your mortgage / debt!

    • Racing?

      ABS capital city house price indices for March quarter of 2013 reported a 0.1% increase in capital city house prices over the quarter.


      Oh sure, boom times are here. Get in quick (rolls eyes)

  7. The RBA will be very pleased that they have been able to induce a pulse from the household debt patient after such extended and extraordinary interest rate manipulations.

    How long can they keep this game going is the big question.

    Probably until the mining bust really starts to set in and the streets of the cities are full of tradies, engineers, building supply employees etc desperate for work.

    At that point they may have to accept that if you want to get housing construction happening the price of the product needs to fall significantly and they will cease trying to resist the inevitable – the resetting of land/house prices.

    Of course some of the banks might get the wobbles but if they really do get shaky a bit of short term nationalisation followed by recapitalisation should do the trick.

  8. reusachtigeMEMBER

    We need even lower interest rates to help this housing recovery along as investors have been suffering!!!

  9. Locus of ControlMEMBER

    True property devotees likely consider FHBs to be AWOL rather than MIA as such. Eg. Who gave you permission to opt out of the property market? Get back in it. Mortgage yourself to the hilt. Property doubles every seven years… You’re a fool if you don’t get on the property ladder. You’ll be renting forever…

    And if they’re not saying that now they will be when overseas investors stop buying.