Among all of the factors that drive house price growth, arguably the most important is the flow of housing finance commitments, which has shown an incredibly strong correlation over the past several decades (see next chart).
On Friday, the ABS released its State Accounts for the year ended June 2015, which has allowed me to calculate the value of finance commitments (excluding refinancings) against gross state product (GSP). This indicator provides a broad gauge of finance intensity across Australia’s various jurisdictions.
