Housing finance rockets!

By Leith van Onselen

The Australian Bureau of Statistics (ABS) has released housing finance data for the month of December, which registered a 2.7% seasonally-adjusted rise in the number of owner-occupied finance commitments over the month:

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The result beat analysts’ expectations, who had expected a 2.0% rise in owner-occupied finance commitments in December.

The number of owner-occupied housing finance commitments excluding refinancings rose by a seasonally-adjusted 2.5% over the month to be tracking 10% above the five-year moving average level. However, they were down 1.3% on December 2014 and still look to be well past their peak (see next chart).

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The average loan size rose by 1.8% over the month to $342,100, and was up 6.3% over the year. The below chart, which shows the series on a 3-month moving average basis (in order to smooth volatility), shows the explosion of average loan sizes.

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First home buyer (FHB) commitments rose by a non-seasonally adjusted 7.7% in December, however, their share of total loans fell to just 14.5% – the lowest in more than a decade. The number of commitments was also down 1.3% over the year. The below charts show the situation. Note, the ABS has revised up its FHB estimates:

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By contrast, investor finance commitments exploded to a new record high, rising by 6.0% (seasonally-adjusted) in December to be up by 19% over the year (see next chart).

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Investors well and truly remain the key driving force in the housing market, with investors hitting an all-time record high 48.7% share of total finance commitments (excluding refinancings) in the year to December 2014 (see next chart).

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Investors have sniffed the rate cut coming and doubled down. Over to you, APRA.

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