Today’s housing finance data, whilst strong overall, was concerning from the viewpoint that first home buyer (FHB) demand remains weak, despite mortgage rates falling to near multi-decade lows.
As shown below, the lion’s share of mortgage demand in Australia is currently being driven by investors and upgraders (see below charts).
Looking at the state-by-state break-down, you can see that the FHB retreat has been driven by New South Wales and Queensland, where grants on pre-existing dwellings were cancelled in October 2012 (see below charts).
A final interesting observation is that the average loan size for FHBs has shown minimal growth over the past four years. Since March 2009, the average FHB mortgage has grown by only 1.8%, whereas the average mortgage for the market as a whole has grown by 9.6% (see next chart).
As noted earlier today, with changes to FHB grants favouring new construction over pre-existing dwellings taking effect in Victoria and Tasmania from July, and in the ACT from September, mortgage demand from FHBs is likely to weaken further.