Yesterday’s new mortgages data from the Australian Bureau of Statistics (ABS) contained more bullish news for Australian house prices with both owner-occupied and investor mortgage demand rising in November, continuing the solid rebound that began in mid-2019 following the federal election:
As shown in the next chart, there is a very strong correlation between new mortgage growth and the growth in dwelling values, with mortgages typically the leading indicator:
Therefore, the ongoing rebound in mortgage demand should propel dwelling values higher over the immediate horizon.
As we know, Sydney and Melbourne are the primary drivers of Australia’s house price rebound, both recording quarterly growth in excess of 5%:
Not surprisingly, then, mortgage demand has also surged across both jurisdictions:
By contrast, the other major jurisdictions have experienced far smaller mortgage rebounds and, therefore, lower price growth, as shown clearly below:
Given recent interest rate cuts by the RBA (with more to come), macro-prudential easing by APRA, and the first home buyer subsidies, our base case is for the rebound in mortgage demand to continue over the near term, with house prices likely to rise through 2020.