What surging mortgage demand means for property prices

Last week we received two very strong pieces of data pertaining to the Australian property market.

First, CoreLogic released its dwelling value results for February 2021, which recorded the strongest monthly rise in values (2.1%) since August 2003. Moreover, every jurisdiction across Australia reported strong quarterly price growth (4.0% nationally):

Dwelling values are rising strongly across every Australian jurisdiction, according to CoreLogic.

Second, the Australian Bureau of Statistics (ABS) released data on new mortgage commitments, which reported their strongest ever monthly growth:

Australian mortgage demand has never been hotter, led by owner-occupiers.

Regular readers will know that I consider mortgage growth to be the single best indicator for Australian dwelling value growth. This is based on years of empirical data showing that growth in new mortgages typically leads growth in dwelling values, as illustrated in the next national chart:

The strong rise in mortgage demand is pointing to big dwelling value gains.

Clearly, the massive acceleration in mortgage demand is pointing to very strong price growth nationally, which we have already begun to witness.

Below are charts plotting new mortgage growth versus dwelling values across the five major capital city markets.

Sydney:

Mortgage demand in Sydney has accelerated to levels above the 2017 boom, but below the 2013 boom. This would suggest the Sydney’s property market is headed for strong price growth in 2021:

The acceleration in mortgage demand is suggesting strong price growth for Sydney in 2021.

Melbourne:

The mortgage rebound has not been quite as strong in Melbourne, suggesting softer (but still strong) property price growth in 2021:

Mortgage demand has bounced in Melbourne, indicating strong price growth in 2021.

Brisbane

Brisbane’s mortgage demand is the second strongest in recorded history, suggesting turbo-charged price growth in 2021:

Brisbane’s mortgage demand is off-the-charts, suggesting very strong price growth in 2021.

Perth:

Perth’s mortgage demand is even stronger – the highest in recorded history – suggesting massive price growth in 2021:

Perth’s mortgage demand has never been stronger, suggesting massive price growth in 2021.

Adelaide:

Unlike the other major capitals, mortgage demand has moderated in Adelaide, which suggests that price growth will soon peak:

Adelaide’s mortgage demand has softened, suggesting price growth will soon moderate.

Clearly, 2021 is shaping up to be a boom year for Australian property.

That said, I am most bullish on Perth and Brisbane. Not only is mortgage growth strongest in these two markets, but they also represent much better relative value, based on rental returns and their historical valuations versus the other capitals.

Unconventional Economist
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Comments

  1. The moritoruam on rental evictions and jobkeeper are both going to end in WA this month. I won’t assume to know what the outcome will be but it should be interesting.

    • innocent bystander

      I too have ben wondering, and asking a few questions of ppl who should know.
      But like you, I have no idea.
      My gut feel is Jobkeeper roll off will be a non event for housing.
      Rent moratorium? Seems like at an individual level it has been pre-empted and addressed but at an aggregate level hard to know. Rent increases seem to be assumed. Doubt it will mean a flood of investor properties hitting the market, but some rumours say otherwise. Such annecdotal volatility usually means a total non event 🙂

  2. pfh007.comMEMBER

    House prices (and other asset prices) rising on a fresh supply of cheap bank credit.

    All those demanding QE and TFF by the RBA should take a bow.

    But don’t forget they will claim it is APRA fault for not doing enough MP-LOL

    • Not cheap credit
      FAKE
      Interest rates are already rising
      This circus is on borrowed time

    • Christopher Reeve

      Or more likely the mortgage buy back scheme which has been operating at full capacity – issuing new loans to buy mortgages in default – so far almost $200 Billion – does anyone seriously think that the graphs above represent reality – just take a look at them. They are quite literally completely and utterly absurd – use your brains for gods sake.

      https://www.theaustralian.com.au/news/latest-news/commonwealth-has-possibly-broken-banking-rules-by-buying-back-stressed-loans/news-story/6e0225c2d7b57e63e08b10955de048bb

      • pfh007.comMEMBER

        “.. Or more likely the mortgage buy back scheme which has been operating at full capacity..”

        Read your own link. APRA gave CBA a smack for doing that and warned the others.

        If you want to claim it is operating at “full capacity” you need something……….like a fact or two.

        Why buy back when the RBA is engaged in a new round of asset inflation that provides an exit path for underwater mortgages?

        None of this detracts from my point that those arguing for QE and TFF were supporting a new round of debt driven asset inflation as that was and always has been the RBA objective.

        • Mike Herman TroutMEMBER

          I think you’ll find the other banks were also doing it…. ANZ 90 mill…

          • pfh007.comMEMBER

            I am sure they were but are they still doing it is the question.

            If they are, despite APRA warnings not to, that would be interesting.

            Now that COVID-19 is almost over and the RBA have the bubble blower back on full it is probably not much of an issue and whatever loans were bought back will be sold off again.

        • Christopher Reeve

          There is only ONE person here who needs to re-read that link mate – it isn’t me. Its absolutely CLEAR the banks were buying mortgages in the hundreds of millions – that was only 3 months of purchases at the very start of the pandemic. ARPRA issued a thinly veiled, wet lettuce leaf hurled from “upper armpit” – banks let that one straight through to the keeper – or do you think banks only skirt laws in regards to things you don’t want to be happening ?

          Whats it was AFTER this that the RBA issued a “free for all” to the banks and industry to do whatever necessary to save the market – including suspending all sales, TFF facility and a plethora of other measures.

          You are KIDDING yourself if you think this is not what was done – absolutely front and center in fantasy land.

          If you sat down and thought about things for one minute mate – you would realise where the ludicrous distortions are coming from – credit growth, new mortgages, etc on record low volumes, huge supply (see SQM), and NEGATIVE home buyers with net zero inflation – literally no way there can be an increase in demand over exploding supply.

          This explains everything.

          Your points in contrast – literally don’t even make sense.

          • pfh007.comMEMBER

            LOL

            I asked for some facts and that was too hard for you?

            You might like your speculations and fevered mind projections but they are at best amusing.

            You should spend less time inventing new names ( did you run out of philosophers?) and more time researching your hysterical rants.

            Any news on those Chinese hypersonic death rays?

            How do they stack up against the space lasers operated by Mossad?

    • Jumping jack flash

      Thanks, COVID.
      Early super release is fantastic.

      I think this is proof beyond doubt that if required, the government has access to a good portion of 2 trillion super dollars that people are ready and keen to use to turn into debt to buy property with.

      The pent up demand is phenomenal. The barrier to debt is not the price of debt which has been cheap for 13 years, but the debt ponzi buy-in. I think we can all agree now that if the government provides access to the buy-in, the people will swarm onto the debt pile.

      • Frank DrebinMEMBER

        Doesn’t even need to be debt – the y can just adopt the suggestion doing the rounds that super balances can be put in a mortgage offset account.

        If that’s the case, alot of punters punters between 40-60 will have instantly smaller debt piles and can load up again. Happy days !!.

  3. When you have parabolic rises in anything, it can turn just as fast.
    This is all been manufactured on fake interest rates to suck people in
    Prices will be rolling over as banks raise interest rates mid year
    That will really scare everyone
    The jury is still out whether the RBA hikes or just banks raise rates

    • working class hamMEMBER

      How do the banks justify rate hikes with TFF being the main source of credit?

      • WCH
        There are many more things that aren’t being discussed on here and I understand people can’t see what’s coming. It’s a very high probability that not all banks will be here by end of year…. we will see serious issues in Italy soon, Germany etc….many of the European banks won’t be standing in second half this year…..the real problem is derivatives counter party risk. This could spread through the world triggering a world wide banking crisis, some banks here just won’t re open….

        Regardless of my more extreme theory, bond yields are going much higher over time as inflation becomes a huge problem
        I have no idea even what the TFF (just another Ponzi tool a guess) is, they can all live in denial believing in the majic fairy, inflation now is a very big problem, you will see RBA and FED will be forced to tighten by mid year.
        Anyone who tells you interest rates are staying low has no idea what they are talking about.
        We are now in a long term bond bear market (much higher interest rates) …..we will get a pull back now in Aussie 10 year maybe 1.30 around from 1.80% but we will be up around 3% by mid year or just after,

        Ponzi schemes always come to an end….we are very close.

        This stage of the bubble is called the parabolic blow off top.

        Watch next few months the blow off will become even more extreme

        • TFF – Term Funding Facility aka “Hey, banks! Here’s a pile of cheap-cheap money you can borrow from us, the fed, so you can go a lend it out multiple times at higher rates” also, one of the many reasons why depositors are getting r*ped with a rusty wire brush, since banks no longer have to pretend they care about them measly savings of those dead-sh*ts

        • Mike Herman TroutMEMBER

          I think we have reached the peak for society’s belief in government/federal reserve/RBA omnipotence. Nothing can go wrong from here, it’s full speed ahead. haha….

      • Christopher Reeve

        Banks have been using TFF to purchase mortgages in default – this represents $200 Billion in bank mortgage purchases.

        I would have thought this blog – out of all the ones who claim to question the mainstream narrative would be all over this – but no. Tells you everything you need to know.

        https://www.theaustralian.com.au/news/latest-news/commonwealth-has-possibly-broken-banking-rules-by-buying-back-stressed-loans/news-story/6e0225c2d7b57e63e08b10955de048bb

        • Yes, buying back all $80 million of it. Doesn’t scratch the surface of the increase in lending

          • Christopher Reeve

            $80 million, one bank – in first two 2 months. Multiply that by 10 banks 10 months increasing every month as it explodes.

            March alone has $30 Billion mortgage defaults – they have set up a taskforce in the thousands to deal with it.

        • You make a fine point. What I say to that is, these days I read the headlines and a first paragraph of the spruik and scroll straight to the comments. So for you to post this, answers your question. This blog did inform me about it, just not the people that got paid to do so 😉

        • Jumping jack flash

          TFF is simply a bank debt subsidy at its essence.

          It makes sense to subsidise debt production and sales in an economy that produces debt, rather than producing any other useful thing.

      • That’s completely untrue

        I said there would be a major equities crash in March April last year (no one was even close to that)
        I said AUD would touch 55 in the March April downturn
        I said interest rates were going to rise with stagflation
        I said gold had reached a temporary high above $2,000 for 1675
        I said many many years ago that the cash rate would get to zero when cash was 4%, I know that because I still have my friends brining that up

        The property crash did start in April last April but they just delayed it and made it much much worse and it’ll happen much much worse

        I did underestimate the extent they would go to to keep all of this insanity

        Job keeper bank repayment holidays etc list goes on

        Just a delay but no change

        I said property would crash into higher interest rates

        I have not said crash this year it’s now meltdown

        Meltdowns are VERTICAL

        The mess is just being hidden

        We are going to have a financial crisis in second half this year that will bring many large banks in the world done and I can’t see our banks all surviving. The meltdown will be worse than anything in the last 100 years and it’s going to trigger a major depression worse than the 30s but they’ll print/increase the money supply to help but.the insane increase in money supply is going to cause major inflation and a major bear market in bonds you can extrapolate what happens to property if mortgage lending is frozen for a period of time

        The finance and banking crisis in 22 financial year will be unimaginable & incomprehensible

        Unemployment could reach 30 to 50% in 22 FY if they can’t stabilise it

        Put that in your outlook calendar

        • boomengineeringMEMBER

          Your predictions are bearing fruit.
          .
          Global Bond Markets Are In Crisis
          by Martin North
          Economist John Adams and Analyst Martin North parse the latest events in the Bond market, and Central Banks’ responses. What does this say about the prospects for inflation, stagflation or deflation?

          • Boom
            I was the only one who said we were headed into stagflation and DLS said on here no way
            No one even mentioned the word stagflation

            Deflation first in the crisis bond yields negative but they’ll expand the money supply like that did last year to stabilise the the global financial system but we are going to have very high inflation and interest rates in the years ahead
            Nothing they do now comes without consequences and that’s inflation

            You can’t have your cake and eat it

            A No recovery no inflation
            B Much quicker recovery + inflation

            They’ll choose B

            The printing just delayed the INSOLVENCY phase that’s ahead

            Major corporations Boeing & Airlines, huge commercial property meltdown etc etc major European banks, it may have been able to be contained more in Europe but the derivatives counter party risk is now too big
            Estimated 1000 trillion or more in derivatives

            Big derivatives players Deutsche commerz goldmans jp Morgan …. HSBC etc there are many others

          • And lo’!
            The chief soothsayer didst most verily bend over
            And point his bare perineum into the
            Deep blue sky

            Exposing it to the vast mysteries
            Of Deep Space
            And the approaching Solar Minimum

            The sunlord was chastened
            By the deep solar burn
            To the most sensitive of places

            But, lo!
            Much wisdom hadst passed via the
            Burnt perineum

            And the sunlord’s mind did most verily expand
            To encompass all the worldly knowledge
            That had ever been
            And twill ever be

            And the sunlord
            Strengthened by the deep burning
            Didst then most assuredly
            Post his prognostications
            Upon the pages of Macrobusiness

            And it came to pass

      • FUDINTHENUDMEMBER

        He’ll be right at some point… Don’t see how much more can be thrown at Aussie property by govt and banks. Could go negative on interest rates for a bit maybe, until the cork that is the Aussie CB loses control? I WOULD have a laugh the day the bank starts paying me interest for borrowing money from them.

        • boomengineeringMEMBER

          Close, but not quite getting paid to take a mortgage out as they still make money on fees.
          and the Danes have a completely different mortgage system.

        • Fund my other concern when bonds really fall in major bond bear market the RBA are going to lose a fortune
          RBA will be in major crisis
          ECB too

          We are going to have a volker crisis, they are going to have to really take interest rates higher like volker did around 1980 to contain major inflation these inbeciles are going to create with this money printing combined with MMT on top will be throwing petrol on the already inflation fire

        • Jumping jack flash

          I think we will simply see more bank subsidies to force debt cheaper, and access to the 2 trillion dollar super pile for sourcing the ponzi buy-in

          • FUDINTHENUDMEMBER

            Lol the the Aussie housing deathstar/black hole really is gonna suck everything else in with it, innit?

          • Jumping jack flash

            Its not just here FUD. Its everywhere.
            House price inflation is just a symptom.

            Banks need not use houses to attach their debt to, but houses are a conveniently large debt container, and the house valuation mechanism is conducive to inflating debt.

  4. Immigration is now a non-issue. MB have capitulated and become mainstream property bulls. Perhaps the responsibilities of having a fund have made them more conservative in their approach. Either way, MB has become very boring of late. Bcnich is consistently the most interesting person to read.

      • Ritualised FormsMEMBER

        Huh?

        After about a decade the rest of Australia has come around to accepting what MB has been running. Australia has been running a population ponzi.

        MB is called real estate will go higher because the policy response to the covid lockdowns has been to unleash a wave of mega credit on the worlds most heavily indebted people and sucker a load more FHBs into the housing market for a life of debt serfdom.

        In that debt serfdom they will find that pay doesnt go up any more, and a big factor in that is the population ponzi, and the ponzi brings a load of other users for the things everyday people like to use, which means prices for them – be they groceries, energy costs, rents, services of any kind – continue going up (to make sure those big inward facing Australian corporates like the banks, the telcos and the big retailers remain profitable) while their pays dont.

        The population Ponzi – particularly the Liberals have punched themselves in the nuts with gender issues and will be desperate – is about to become the issue.

  5. Have I stumbled onto the domain site by accident?? Such property bulling goes on here these days…

  6. Nothing has changed since Donald Horne wrote t” Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise” He also said “Australia’s climb to power and wealth was based almost entirely on luck rather than the strength of its political or economic system. And while other industrialised nations created wealth using clever means such as technology and other innovations, Australia did not. Rather, Australia’s economic prosperity was largely derived from its rich natural resources and immigration. Horne observed that Australia “showed less enterprise than almost any other prosperous industrial society.”
    What other nation pumps up none productive property at the expense of productive economic activity – ZERO Whilst productivity innovation complexity sophistication is down the shithole where good old Oz joins Mali and falling fast https://atlas.cid.harvard.edu/rankings

  7. Jumping jack flash

    All it took was a sniff of super money to cover the ponzi buy-in, a tiny, tiny 36 billion, and look at it go!

    Imagine when they release 100 billion, or a trillion.

    Watch what happens when the US stimulus is released and starts being leveraged, then hits us like a global tidal wave of debt. It’ll be something else.

    We will get our perpetual debt. We will get our debt hyperinflation. It is the end game of their carefully planned economy, designed by the banks, for their benefit.

    Watch CPI

    • Watch what happens when something like China puts a move on Taiwan or when there is some action in the South China Sea or when North Korea starts flying missile over Japan again or towards Samoa. You guys seem to operate under the delusion that the economy operates in a vacuum.
      The chocolate soldier of currencies, the Aussie Dollar, will be liquified, and property across the country will do what it did in the eastern suburbs of Sydney after a couple of Japanese mini subs cruised right into Sydney Harbour- it’ll tank.

      On another note, Bcnich, I love your work but didn’t you predict a Trump victory?

      • Jumping jack flash

        True.

        The system is bigger than Australia though, we are just a single player in a carefully orchestrated system, designed by the banks, for the benefit of the banks, after the banks were handed the keys to the economy.

        The first step was to make the economy totally dependent on the banks, and able to be controlled by them.
        Never forget that in a properly functioning economy that transforms raw materials skillfully into useful, high-quality items to sell to the world for profit, banks aren’t actually needed at all. Adjusting interest rates wouldn’t do much, certainly not be able to control things like full employment and inflation.

        Indeed, interest rates would be set as a response to the overall health of the economy, not the other way around. Since the banks were put in charge everything is all backwards and inside out.

        If you look at other developed economies you will see identical issues as we have here in Australia, all occurring at roughly the same time and in the same way. It is all the same system, using the same strategy, implemented in the same way. When things go wrong, the same strategies are attempted, in the same order.

        Governments gave up trying to manage economies long ago. They sucked at it. They were tired of the whinging! Oh, the whinging of the plebs was incessant. Thatcher had had enough of the whinging!

        Governments needed to focus on the important issues instead of being bogged down in minor details like the economy, and people, and provision of essential services to their people. So they handed it all to the banks et al, and set up a central bank to oversee them all.

        The economy is money after all, isn’t it, and who better to manage money than the banks?