Australian housing finance rockets

ScreenHunter_06 May. 13 11.32

By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of September, which registered a seasonally-adjusted 4.4% increase in the number of owner-occupied finance commitments over the month:

ScreenHunter_198 Nov. 11 11.34

The number of owner-occupied housing finance commitments excluding refinancings registered a seasonally-adjusted 5.0% increase over the month to be tracking 6.6% above the five-year moving average level. The number of commitments were also up 11.0% on September 2012 (see next chart).

ScreenHunter_199 Nov. 11 11.40

The average loan size rose 1.9% over the month and was up 1.8% over the year. The below charts show the series on a 3-month moving average basis (in order to smooth volatility).  Note the stagnation in average loan size since falling over the first quarter.

ScreenHunter_200 Nov. 11 11.49
ScreenHunter_202 Nov. 11 11.52

First home buyer (FHB) commitments slumped, recording a 9% non-seasonally adjusted fall in September and represented just 12.5% of total owner-occupied commitments – the lowest share on record (see below charts).

ScreenHunter_203 Nov. 11 12.01
ScreenHunter_204 Nov. 11 12.02

If you’re wondering where the rocket by now, look no further. The ABS only provides the value of investor finance commitments. These were up by 5% in September, 22% over the year, and hit the highest level on record (see next chart).

ScreenHunter_205 Nov. 11 12.07

Overall, this is another strong release, albeit clouded somewhat by the ongoing weakness in FHB mortgage demand and the lack of growth in average loan size, as well as a question over finance for purchases of new dwellings which is slowing.

[email protected]

Leith van Onselen


      • Correction they have created a disaster…it’s been in the making for the most part of last decade.

      • “They are creating a disaster here.”

        that s sure, fewer new dwellings while we have a skyrocketing population growth is not going to cool down anything.

      • @ff

        not really, if I change my PPOR it s going to cost me more and in term of IPs I still need to invest, a higher price is not going to be any good.

        high prices are only good for those who exit the market (beside FIRE of course), which are not many in reality.

      • @ff

        There are all slightly + but I m repaying my IPs as well, my case is a bit particular, the offsets are more to put my cashflow somewhere and having the IPs all paid for one day.Nothing too fancy, KISS, I dont have too much expectation ( and I m not planning to sell my IPs, ever, I leave that to my kids)

      • @ff

        no putting money in theoffsets is not losing money, but the returns are pretty positive once I add a good premium as I consider realestate extremely safe in the medium long term ( you guys have a different opinion but facts are stubborn).I cannot afford not to invest in realestate.

      • How are new dwellings slowing? Finance for new dwellings has been flat for 6 months but still well up on a year ago.

        And building approvals,HIA new home sales and vacant land sales are rising strongly.

      • @dam Losing money = rental yield below TD or save account rates.

        So unless you’re on > 185 K I can’t work out how you don’t care about CG.

      • “I cannot afford not to invest in realestate.” – dam

        Is it required as part of the terms of your employment?

      • BTW dam, if you are earning what you claim to be, having money in the offset account does nothing for NG. Kinda defeats the purpose of it all won;t you say?

  1. And the crazy thing is that with some sensible policy regarding developing and financing new land and new housing construction, they could have achieved a re-balancing without squirting lighter fluid (low interest rates) over our highly inflammable specufestor community.

    “Earth to the Boy in the Bubble – can you hear us.”

    Time for a National Summit on New Housing Construction.

    Time for a National Summit on the role/charter of the RBA and the use of monetary policy has the primary tool of economic management.

    • Until the thing blows up you won’t get nothing.

      And they’ll do everything to ensure it never blows up and everyone will like their debt ridden misery.

  2. Are Australians braver or more stupid than people in other parts of the world?Tom ,Dick and Harry on the street know the economy is soft and their jobs are not secure any longer.

    • I reckon this is a direct result of not having had a recession in 20+ years. (Nearly) everyone has forgotten that we can have economic bad times as well as good.

      For mine, it means that our next recession is going to be a very bad one.

      • Mining BoganMEMBER

        Australia is the fat bloke sitting on the couch, sucking on a grog, watching the footy and congratulating himself on the great game he played in the reserves thirty years ago.

        He thinks he’s still going orright but someone needs to take him out for some exercise.

  3. “First home buyer (FHB) commitments slumped, recording ….the lowest share on record” That’s the REALLY good bit. The FHBers are going to be needed to take up the remains of the investors portfolios when the MASSIVE correction happens. My hope is that they have the sense to restrain themselves as prices fall, and wait for sensible asset prices on an income basis to arrive. Given that many potential FDHBers are going to be lucky just to have an income….the correction is going to be the stuff of folklore.

  4. Yes, causing a disaster (and depression).
    The hidden problems being caused by the stupidity of politicians and the greed of investors.

    From Saturday’s Age.

    “It’s a phenomenon becoming known in the property industry as GOMO- Grief Over Missing Out.”

    “The Anguish felt by those who pin all their hopes on buying a particular property but are outbid at auction, or have their private sale offers gazumped by competitors, are increasingly slipping into a state similar to clinical depression, experts say.”

  5. Liu MianzhiMEMBER

    Excuse my ignorance, but why is there such a great disparity between investors and FHBs at the moment in particular?

    I understand that negative gearing (and depreciation claims etc) is a big issue, but it has been there for a long time, so it doesn’t explain the current spike in disparity between the two groups. If anything you might expect it to be less of a benefit when interest rates are low.

    Demographically, the Boomer cohort have been in the earning sweet spot for a while but some at least would be getting close to retirement now. Given the said influence of tax policy, you would expect a kick up in housing investment well in advance of retirement so they can still offset losses against taxable income, not at the very end of their careers.

    The FHB grants might have pulled forward some demand, but they have been wound back for a little while now in NSW and QLD. Considering the size of the grant, the pull forward surely has not been that enormous and prolonged (EDIT: and the figures show it is getting worse, not better, whereas you would expect a drop after the policy change, then at least some improvement by now).

    The SMSF figures suggest that, while significant, it is not that large a factor. It might explain it a little, but not that much.

    So why at the moment, as opposed to at any other time in the past decade or so, is housing SO much more attractive to investors than FHBs. Apologies if this has been answered elsewhere.

    • GunnamattaMEMBER

      There probably isnt a definitive answer

      But I would start with the approach of Australian ZIRP.

      The access of those with collateral to easy credit

      And the (IMO) vastly increased sense that bricks and mortar is the surest and safest bet there is to both protect from a downturn, and to leverage any upturn (coupled with fear of equities and other investments – all of which have seen corrections well in advance of anything seen by Australian housing).

      Then comes the tax breaks

      Then comes bank lending policies.

    • just because when you want to invest in Australia, there is pretty much nowhere else to go than well located existing dwellings.Shares are dud ( no real returns over 5-10 years), bonds not much, saving on the way to zirp, investing in businesses is even riskier than spiting on a bikie.

    • Possibly young people are giving-up on buying a decent home for themselves and are instead “investing” in something cheap and nasty to get a tax advantage over bank deposits and to get their foot on the ladder.
      I have no evidence of this, but it makes sense to me.

  6. Yes AB, 20+years without recession will cause a severe recession IMHO. In “The old days” we used to have a recession every 8 or 9 years which kept prices and costs in check.
    Does anyone on here believe ‘like me’ that it is inevitable that we will end up with multi-year deflation,similar to Japan but maybe not as long?

    • GunnamattaMEMBER

      The sons of Nippon ran a generations worth of current account surpluses to cushion that baby, and have been buying their own bonds.

      That happens here we will see the cliff/international funding exit turn into a balance of payments crisis

      • “That happens here we will see the cliff/international funding exit turn into a balance of payments crisis”


        Did anyone else read the garbage that Hockey spat out at the CIS?

        We need $40-50 billion per year for fund our lifestyles…as if that’s not an absolutely disastrous thing. If that’s not a national age of entitlement, I don’t know what is.

        “Of course we need new investment to develop our nation’s products and a welcoming approach for foreign investment is essential in that regard.

        It is worth reminding ourselves that each year we need $40 to $50 billion of net additional foreign investment just to fund our lifestyles through our current account.

        This foreign investment has been a key driver of our economic growth since 1788.”

      • @AB
        “It is worth reminding ourselves that each year we need $40 to $50 billion of net additional foreign investment just to fund our lifestyles through our current account.
        This foreign investment has been a key driver of our economic growth since 1788.”

        The real danger with living beyond your means, is that while the productive industries are long dead, their collective debts remain.

        It’ll be a rude shock for many banksters when they figure out they’ve been swindled in the great Aussie real estate scheme. They’ll have the last laugh of course because Australians collectively need this borrowed money to keep the scheme afloat. Unfortunately if the Aussie system ever collapses it’ll make Greece look like a training exercise, so EVERY step is being taken to prevent collapse. This obsession diverts money from creating anything new which …..

    • “Does anyone on here believe ‘like me’ that it is inevitable that we will end up with multi-year deflation,similar to Japan but maybe not as long?”

      Yes. Although I wonder if it might not be a sharper shock that what Japan has been / is living through.

  7. A breath of fresh air after the last messy 10 years of no price growth, finally some price gain respite for the poor mortgage holder with a bit more fat in his mortgage!

  8. this is fantastic news again but I’m personally disappointed with FHBs who deserve no credit and really arent pulling their weight. Surely there must be a way to bring more FHBs in?
    Where are the multi generational loans? The govt could follow UKs shared equity loans?
    follow tassie’s example and implement 30k FHOGs
    if 3 or more families on average incomes pool together then they too could enjoy a unit 30k from the city.
    how about tax breaks for owner occupiers?
    what about automatic visa for FHBs from overseas?
    could we charge more tax to non home owning families for not contributing to their community?

    there is so much that can be done to bring this vital market segment back in. Write to your MP now!