Speculators run wild in housing finance

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By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of October, which registered a seasonally-adjusted 1.0% increase in the number of owner-occupied finance commitments over the month:

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The number of owner-occupied housing finance commitments excluding refinancings registered a seasonally-adjusted 2.0% increase over the month to be tracking 8.1% above the five-year moving average level. The number of commitments were also up 13.2% on October 2012 (see next chart).

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The average loan size rose 1.8% over the month and was up 4.0% over the year. The below charts show the series on a 3-month moving average basis (in order to smooth volatility).  Note the spike in average loan size after falling since the beginning of the year.

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First home buyer (FHB) commitments rose by a non-seasonally adjusted 10% in October, but represented just 12.6% of total owner-occupied commitments – the second lowest share on record (see below charts).

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Finally, if you’re wondering what’s primarily driving house price at the moment, look no further. While the ABS only provides the value of investor finance commitments, these were up by 8% in October, 29% over the year, and hit the highest level on record (see next chart).

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  1. That final graph would be a post on its own. If I was a chartist I may reference the two peaks before it in ’02 and ’06 and say it must drop off.

    As I am not a chartist I can only say this is going to be a very interesting next few months.

  2. The reckoning cant come quick enough. The way I see it if the US does not recover and start tapering the AUD will stay high and keep destroying our industrial base triggering a recession and if they do recover and U S rates increase there will be some sort of crisis as with every other US tightening cycle this time it may well be a re run of the asian crisis as the dollar peg countries get blown up. With Australia getting murdered by high interest rates also.


    Look! Look!

    A hockey stick! New trend forms! Rebound!

    The spruikers have invested much to discredit the FHB detail in this statistic. Yet it tallies exactly with the mumble of the market as young would-be homeowners are outbid by investors.

    Let them take it, Homesteaders. Renting is a snip at these price/rent multiples. But don’t do nothing; do something else: save, invest or study. Any of these will produce better life-time returns.

    Don’t Buy Now!

  4. Ha! I am to be held to account by an avatar operated by the politico-housing complex. That’s bloody rich!

    As Zhou Enlai observed: “It is too soon to say.”

    These current gains will prove a chimera. When, in future years, mortgage interest rates revert to mean, as they must, repaying half a million in principal is really going to hurt.

    A lifetime of sacrifice by wage earners to buy a plot may be your preferred natural order, but anyone who takes a moment to glance at history will see this is a very recent and destructive trend.

    Don’t Buy Now!

    • David
      These clowns are doing their best to turn currencies valueless. Repeating myself…at zero IR’s everything in the world is worth infinity. CB’s believe inflation will solve everything so we can be guaranteed they will continue to try to create inflation. They are likely to be more successful than they think.
      So we’re talking nominal values here not real. I believe that changes the assessment of what is likely, or not, considerably

  5. Exactly what you’d expect if successive governments cynically punish savers, the RBA plays with itself, sorry – interest rates as a substitute for serious policy and most people are rightly nervous about oversized PE ratios in stocks. I’d say a successful set of government policies has been implemented here. Aren’t we all following the narrow path they dictated? It only remains to burn Ken Henry as a reformist heretic at some point.
    Anyway, those black tulips sure do look nice…

  6. Hill Billy 55MEMBER

    Hi Turnitup, Interesting property that you have highlighted, however the median rental shown on that page for Hampton is $420. You have chosen a top of the range property to compare.

    The steep slope of the recent months of commitments shows the number of lemmings joining the property specufest at the moment. This together with the RP Data report of a couple of months ago that showed 25% of sales in the 2013 financial year either broke even or made a loss suggests that now is not the time to buy property. The tide will turn!!