Mortgage growth points to stronger property market

Friday’s housing finance data from the Australian Bureau of Statistics (ABS) points to a rebound in Australian property price growth.

This data showed a dramatic 12.6% lift in mortgage finance commitments (excluding refinancings) in August, with owner-occupied mortgages surging 13.6% and investor mortgages rising 9.3%:

As regular readers know, mortgage growth is one of the best indicators for property price growth having displayed a very strong historical correlation.

Below are charts plotting the annual value of mortgage growth (excluding refinancings) against annual dwelling value growth.

First, here’s Sydney:

Next Melbourne:

Next Brisbane:

Next Perth:

Next Adelaide:

Finally, below is the 5-City aggregate:

As shown above, the mortgage rebounds have been strongest across the smaller three capitals, which is also reflected in their recent price rebound:

Sydney’s mortgage market has also experienced a moderate rebound, pointing to price stabilisation, whereas Melbourne’s remains week, suggesting further falls.

Another interesting feature is the extent by which the current rebound is being driven by owner-occupiers rather than investors:

We expect mortgage demand to increase as the Reserve Bank of Australia monetises the mortgage market via the Term Funding Facility (TFF) and the Morrison Government abolishes responsible lending laws.

On the other hand, the collapse in immigration and the unwind of emergency income support (see next chart) will weigh heavily on prices in 2021.

It’s going to be a ‘tug-of-war’.

Leith van Onselen

Comments

  1. Perth is down, what, 20% in 6 years?

    If we assume Sydney follows suit, that’s a long time to wait for FHB who want to buy now.

    I’m not sure a slow downward movement over the next five years is relevant for someone who plans to live there for a decade or more. Certainly that’s the position I find myself in, looking in North West Sydney (Hills District out to Hawkesbury area).

      • My rent is $680/week. Mortgage minimums on the type of place I want – much better than where I am – are $760/wk, and I can pay significantly more than that. Added to this, my savings rate has taken a hit for the next four years (because reasons) so my deposit will grow by far less – less than half – than what I’m paying in rent each year.

        Finally, I can still afford the mortgage at 7%, a rate I doubt we’ll see this decade.

        The only downside I see is if I lose my job, the buffer I’ve built up (the deposit) is gone. The only guard against that is to try to build the buffer up again as quickly as possible into an offset account, which is what we plan to do with every $ above minimum payment.

        • Don’t forget council rates, water rates, property maintenance like roof, foundations, plumbing, electrical, gas, heaters and so on…stamp duty is also a killer in Sydney.

          Running a pool costs a small fortune also. I never wanted 1 but have 1.

          The offset account is the best way to go. Since rates look to trend lower. Gives you some liquidity.

          Lots of benefits to owning, but rent is hassle free also. My rental was falling apart, but I didn’t have to worry about the costs..

          Also if you own you can sublet (if property suits) and or move out and rent (if you lose your job) to cover mortgage .. if things get bad enough.

          • True, I meant in terms of financial obligations. Having a Kent for a landlord was definitely a reason I wanted to buy. I also hated Real Estate agents.

    • Agreed mate, it’s a disaster in the north west for young families trying to give it a crack. Reckon I’ll end up in box hill just to get something half livable.. and even then I won’t be able to afford it and it’ll probably cook me alive in the summer

  2. That is a lot of credit growth.

    IMO, for most people, if this is the deepest recession since the great depression, then they’d opt to have one every year.

    We are not experiencing anything like recession conditions yet.

    When fiscal support recedes the pain will commence and that will test the herd.

    I’d be in the market to buy however I think the odds strongly favour holding off until Q1 2021 when the real price trend should become clear – not the current Rentkeeper trend.

    • I think the odds strongly favour holding off until Q1 2021 when the real price trend should become clear

      ☑✔✅ This is a weird market that is best left alone for the time being.

  3. peterbruceMEMBER

    It has been obvious for at least the last four months in Adelaide, to any one with the slightest interest in our RE market that it was going Gangbusters. Shows you how long it takes stats to catch up with whats going on.

      • peterbruceMEMBER

        I noticed back in April when I rolled up to a couple of open Inspections, and I could not get a park in the street. Just the opposite to what I was expecting. It’s been the same ever since. The fact that it has just shown up on core logic means to me that they are a waste of bloody time if your thinking of spending the odd 500 to a mill on the guidance you get from them.

  4. House next to my parents over the weekend failed at auction. For sale now.
    Apparently a lot of lookey loos turned up but guess no cigar.
    Another place 2 weeks ago failed at auction, husband went to look at it to keep an eye on it, but it did sell 2 weeks later. Not sure of the prices though.
    Not an area that usually got failed auctions. I don’t know, it’s not THAT strong of a market where we are.

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