This week we received two key data inputs into the Australian property market: 1) the January price results from CoreLogic; and 2) December mortgage finance data from the Australian Bureau of Statistics (ABS).
As regular readers know, we consider mortgage finance to be the best short-term predictor for property prices. This view is based on the strong historical correlation between the value of mortgage finance commitments (excluding refinancings) and dwelling value growth, with the former typically leading the latter:
As shown above, annual mortgage growth soared by 26% in trend (3MMA) terms in 2020, signaling a strong rise in dwelling value growth in the period ahead.
Mortgage growth has accelerated in NSW, similarly portending stronger dwelling value growth in Sydney:
The story is different in Victoria, however, where mortgage growth has failed to launch. This suggests that Melbourne dwelling values will grow more slowly in the period ahead:
However, the biggest acceleration in dwelling values is likely to occur across the smaller main capitals – Perth, Brisbane and Adelaide – where mortgage growth has literally exploded:
Another interesting aspect of the current housing upswing is that unlike most prior episodes, which were driven primarily by investors:
This bull market is being driven by owner-occupiers:
Whatever the case, the boom in mortgage commitments is signaling strong property price growth, led by the smaller capitals.
