Australian Finance Group (AFG) has released its housing finance data for the month of May, which registered record high mortgage applications on the back of record investor demand.
The number of mortgage applications rose by 15.2% in May and by 10.0% over the year to 9,815, whereas the value of applications also surged by 18.0% over the month and by 16.9% over the year to $4,218 million (see next chart).
As noted above, investors continue to drive new mortgage demand, with their share rising to a record 40.0% in May. By contrast, first home buyer share continues to languish at just 10.2% in May (see next chart).
According to AFG, New South Wales continues to be the mecca for investor activity, accounting for a whopping 49% of mortgages in May. However, the proportion of investors in Victoria has also surged to 40%, with Queensland not far behind on 39%. Investor demand was lower in South Australia and Western Australia, which accounted for 34% and 31% of loans respectively in May.
As noted previously, some caution should be exercised in interpreting AFG’s figures and extrapolating its results to the overall mortgage market, as measured by the Australian Bureau of Statistics (ABS).
AFG’s data measures mortgage applications, whereas the ABS measures actual mortgage commitments. According to AFG’s General Manager of Sales & Operations, Mark Hewitt, just over three quarters of applications on average become mortgage commitments, although this figure can obviously fluctuate month-to-month. AFG’s market share has also been rising in recent years.
Therefore, while AFG is a useful guide as to the strength of mortgage demand, its results do not necessarily translate to the overall mortgage market as captured later by the ABS.
To illustrate, consider the below chart showing how the growth of AFG mortgage applications has diverged significantly from ABS mortgage commitments since November 2009:
Nevertheless, the AFG data does confirm that investors are the key driver of Australia’s housing market.
