Mortgage collapse points to further property price falls

Advertisement

Yesterday’s mortgage commitment data from the Australian Bureau of Statistics (ABS) continues to point to price falls for Australian property.

The next chart plots the annual change in the value of mortgage commitments (excluding refinancings) against CoreLogic’s 5-city dwelling value growth to July:

As shown above, mortgage growth has historically been a strong leading indicator for price growth. Thus, the sharp decline in mortgage growth – from 16% in March to 6% in June – signals further falls in property price growth.

Advertisement

The below charts present the same data for the five major capital city markets:

As you can see, mortgage growth has turned down across all major markets which, other things equal, points to falling property price growth.

Advertisement

With jobs, employee incomes and expenditure decimated across the economy, collapsing immigration, rising vacancies, and the ending of emergency income support and mortgage repayment holidays, the Australian housing market is facing a perfect storm.

Melbourne is obviously most exposed owing to its extreme reliance on immigration alongside the economic carnage from its hard lockdown.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.