Australian housing finance tanked in August

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By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of August, which registered a seasonally-adjusted 3.9% fall in the number of owner-occupied finance commitments over the month. The result disappointed analyst’s expectations of a 2.5% fall.

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The number of owner-occupied housing finance commitments (excluding refinancings) registered a seasonally-adjusted 5.3% fall over the month of August to be tracking 3% above the five-year moving average level. However, the series is up 8.7% on August 2012.

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The average loan size was steady over the month, but was down 0.2% over the year. The below charts show the series on a 3-month moving average basis (in order to smooth volatility).  Note the recent downward shift after the bounce over the June quarter.

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First home buyer (FHB) commitments has slumped once more, recording a 13% non-seasonally adjusted fall in August and represented just 13.7% of total owner-occupied commitments – the lowest level since April 2004. They were also 22% lower than August 2012 (see below charts).

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The ABS only provides the value of investor finance commitments. These were flat in August, but were up by 26% over the year and remained at the highest level since June 2007 (see next chart).

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Overall, this is looks like a weak release, with owner-occupied mortgage demand falling sharply, led by FHBs, and average loan sizes also starting to trend lower. It remains an investor-led housing bounce.

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Comments

  1. “It remains an investor-led housing recovery”

    Hardly surprising when we are subsidising investors in second-hand houses to the tune of $5bn per year just on NG loopholes.

  2. I’m a bit confused on these release given strength in auction results.

    Is the expectation that these numbers will pick up over the next few months to line up?

    What are alternative reasons driving price appreciation:
    – SMSF reallocation to property sector?
    – Worsening supply situation?
    – Offshore capital?

    • thomickersMEMBER

      i’d say lower interest rates have done it.

      50% LVR used to be negative gearing, now its slightly positive.

  3. thomickersMEMBER

    If anyone wants to know what geared real life monopoly looks like, last chart explains it…

      • That chart would look a lot scarier if the investment figures were a % of GDP. And our new government wants to loosen the rules even further with the agricultural limits.

        People < Bubbles

      • +1

        That we are getting about 10 times the rate (based on population size) of Chinese investment compared to the US says a lot about the size of the mining/processing investment over the last few years.

        Also our vulnerability to a rebalancing of China’s overseas investment towards other countries or its economy away from steel intensive infrastructure and high rise investment.

      • Yes – those graphs do explain a lot.

        To allow their export economy (owned by key winners in the CCP inner circles) to remain competitive they need to be out buying lots of foreign assets that will help keep the yuan exchange rate under control.

        And rather than load up on US treasuries spread it around as much as possible.

        Think of it as a CCP-Insiders off shore wealth fund.

        That way if anything did happen politically in China – a lot of assets are held out of reach of the angry masses.

        Perhaps those buyers of property in Australia are not so concerned about keeping it away from the CCP (as they may be close to it themselves) but perhaps from people who don’t like the CCP. Just a thought.

        So while some more enlightened members of the CCP may believe in rebalancing and a new relationship with the Chinese people as household incomes increase, there are likely to be more than a few who reckon the current model of suppressed household incomes, export industries, off-shore asset purchases to keep the currency down is a swell idea and change should happen nice and slowly.

        Marvelous what a totalitarian government can achieve and the eagerness of a conservative LNP government to leap into bed with them.

  4. Those with enough money in their super to be investing with it are boomers, whereas FHBs are younger, and have scrapped together a deposit, only for superannuation rules to be changed allowing gearing in the super funds and taking the entry prices above where the FHBs can afford. That is it in a nutshell.

    Boomers with cash in their SMSFs are buying the properties as FHBs cannot afford to. Anecdotally, 80% of home viewings are being attended by boomer investors.

    The question is, who will buy the properties when the boomers need to cash in to fund retirement?

    (Hint: Rule changes to keep the bubble alive… OS buyers?)

    • ”The question is, who will buy the properties when the boomers need to cash in to fund retirement? ”

      Many of them will not be sold, you will inherit them in about 20 years time or so. (if you are a gen y that is)