Mortgage market shows coast-to-coast property boom

Yesterday, the Australian Bureau of Statistics (ABS) released data on new finance commitments, which showed booming growth in both owner-occupied and investor mortgages.

As shown in the next chart, owner-occupied mortgage commitments rose 55.6% in the year to March 2021, whereas investor mortgage commitments rose 54.3%:

New mortgage growth

Annual growth in both owner-occupied and investor mortgages is running at historical highs.

As regular readers know, the growth in new mortgage commitments has historically correlated very strongly with dwelling value growth. The reason is straightforward: the overwhelming majority of buyers borrow to purchase a home. Thus, when mortgage demand rises, so do property prices.

Below are a series of charts tracking the annual growth of new mortgage commitments by value against annual dwelling value growth across the five main capital city markets.

Sydney:

Sydney’s trend mortgage commitments grew by 39% in the year to March 2021, which is similar to prior peaks. Not surprisingly, Sydney dwelling values are also growing strongly, rising by 8.8% over the April quarter:

Sydney mortgage growth vs prices

Sydney’s mortgage boom signals strong property price growth.

Melbourne:

Melbourne’s trend mortgage commitments rose 40% in the year to March, which is above prior peaks. Price growth was also strong at 5.8% over the April quarter:

Melbourne mortgage demand vs prices

Melbourne’s mortgage demand is now running above prior peaks.

Brisbane:

The growth in Brisbane mortgage commitments is running close to the 2003 peak at 63%. Brisbane dwelling values are also booming, up 5.6% over the April quarter and 8.3% year-on-year:

Brisbane mortgage demand vs prices

Brisbane’s mortgage demand is running near an all-time high.

Perth:

Perth’s mortgage commitments are experiencing their biggest ever boom, up 99% in trend terms in the year to March. Dwelling values are also rising fast, up 4.2% over the April quarter:

Perth mortgage demand versus prices

Perth mortgage demand has never been stronger.

Adelaide:

Adelaide’s mortgage demand is blowing the roof off, up 50% year-on-year in March in trend terms. Dwelling value growth is also strong at 4.3% over the April quarter and 10.3% year-on-year:

Adelaide mortgage demand versus prices

Adelaide’s mortgage demand is blowing the roof off.

In summary, the coast-to-coast boom in Australian property values is reflected in mortgage growth, which is running at or above historical highs across every major market.

Once mortgage demand starts to wane, so will property price growth.

Unconventional Economist

Comments

    • Savvy Mum and Dad Investor

      Not in Australia. You have to turn off the news and social media. Life is basically normal, rates at all times lows, enough jobs for people, lot of income that would have been spent on overseas holidays spent in Australia now, returning expats with a bit of coin.

      • Display NameMEMBER

        Stimulus of the order of WWII just tapering, about 18% slack in the labour market, responsible lending dead and buried. Many mortgages at 6,7,8 times debt to income.

        Interest rates can never go up again without a whole raft of people loosing their houses. Serviceability may be good ATM but a mortgage is for most people a 20-30 year commitment. To bet against interest rates going up in that period would be nuts.

    • Indeed we are, as evidenced by the all-time-low interest rates. In fact, the prevailing interest rates suggest that we are facing the biggest disaster in the entire human history. Nobody knows what that disaster might be – perhaps an all-out global thermonuclear war is about to happen? I cannot think of anything else that could qualify as the biggest disaster in the entire human history. Or is this just another case of crying wolf?

      But then again, in the QE-infinity world, good news is bad news and bad news is good news, so a crisis is meant to be a wonderful thing. Are we wonderful? Apparently we are!!!

      • The Traveling Wilbur

        Warner being dropped from the IPL?

        The NRL moving to a conference-based regular-season format?

        Warner getting back into Australia?

  1. MathiasMEMBER

    10 year Bonds flat since February:
    https://tradingeconomics.com/australia/government-bond-yield

    Migration flat.

    Its odd that Real Estate values would be performing better then ever at a time when migration / money printing have just been pulled back. Im dubious. Doesnt strike me as sustainable.

    Huge amount of jobs in NSW / VIC. Doesnt seem to be reflecting anywhere else, though. Its not unusual for the other states.

    ACT (ALL) 6,166
    NSW (ALL) 85,075
    NT (ALL) 2,808
    QLD (ALL) 36,031
    SA (ALL) 8,746
    TAS (ALL) 2,568
    VIC (ALL) 89,963
    WA (ALL) 30,669

    Everyones bailed from NSW/VIC capital cities leaving a jobs glut?

    Government Debts jumped a bit.
    https://gyazo.com/a9b2870e9271bfe95f8bdacbda9dd67d

    Im surprised ScoMo hasnt opened migration into NSW / VIC .

    I dunno. Australias practically a Tribalist Nation. Im dubious about everything these days.

    It strikes me odd that ASIO’s talking about Terrorism in a year.

    The Greed afflicted want you to believe that everythings worth twice as much so they’ll profit like crazy and you’ll pay higher prices for everything. The bears are thinking, this cant go on forever. At some point, somethings gotta snap. Yeah, we can probably pull in another 5 million migrants shared between Sydney and Melbourne, and dump a tonne more money printing, but god help us.

    Demographics would suggest bearish boomers running around upselling everything till 2028, but I cant see things lasting that long. War with China and Interest Rates already pretty low. Its all just accounting tricks at this point to make things look shinier then they really are.

    A house is a home. Its not an investment. Its pretty traumatic watching an arrogant country murder off half its population so that a few scumbags get to squeeze out a little profit. Stocks wouldnt be so bad but doing it on housing is humanitarian. Australia talks about the Uyghurs and here we are murdering off half the population with houses. Not much different.

    I havent the words to express how sickened I am by a Country of Boomers threatening people with Houses.

    Im not getting involved either way. I just hope too many Australians arent dead before this finally runs its course. The Boomers are no different to the Chinese. Same thing, just different a$$hole.

    • Jumping jack flash

      “Its odd that Real Estate values would be performing better then ever at a time when migration / money printing have just been pulled back”

      Hardly a surprise when they instigated the largest buyers grant in recent history. Up to 40k to go towards a mortgage deposit. Just a 6-month lag to endure, and it is fairly obvious looking at the stats.

      Brisbane and Adelaide house prices are at the levels where 20 – 40k would likely account for a 5 – 20% deposit outright. Sydney and Melbourne had to wait a bit longer until the 40k passed the 6-month cooling off period, and then likely it added to whatever deposit people had already scraped together over the decades.

      • Yes and for every 5K extra cash pulled from super or gifted from government & the bank of mum and dad, is geared with a government backed no LMI 95% LVR loan to multiply to an extra 100K. Looks to me like 3 years of future first home buyer demand has just been sucked in to the present.

        • SoMPLSBoyMEMBER

          Yep!
          Seems to me the RBA (and entourage) saw the ‘last fuel here’ sign and decided to fill the main and aux tanks.
          Now, all topped up and feeling pretty smug, they ease the rigs into gear and prepare for the divide crossing. But its not the road they ‘know’ anymore and worse, it’s unimproved and sure looks rugged.
          It’s going to be an adventure!

        • Jumping jack flash

          Oh there’s still plenty of pent-up demand don’t worry about that.

          The barrier is not servicing the debt, debt is super cheap and has been for quite a while now, the problem is saving the total price of a 2008 house for a deposit on a 2021 house, where incomes have barely risen, and everyone needed debt in 2008 to buy a house as well!

          40K helps a lot, as we see, but in places like SydMel its just a drop in the ocean of what’s required to buy into the ponzi.

          • Just the average bank of mum and dad loan/gift of 90K levers up quite nicely to 1.8mil on 95% LVR

  2. ChristopherMEMBER

    The amount of denial in the comment section is worrying, the metrics are all pointing to a runaway boom that even if prices do moderate in the future they are going to be pulling back from a much higher base than today.

    We could be looking at 20% gains over a 12 month period, the biggest fall that I recall over the past 20 years is approximately 10% over 18 months.

    • Jumping jack flash

      This.

      I expect that it will level off quite quickly now. It is almost time for the 6-month cooling off period for the last of the 40K super to have elapsed so it is fairly safe to say that everyone that was able to use the super money as a deposit has done so. There may be a few stragglers, maybe planning on using this year’s tax returns to supplement their deposits, but the bulk of the party is pretty much done.

      • working class hamMEMBER

        The graphs MB has been showing are finally showing investors jumping in.
        Sold your last dog of a IP to a FHB with super/BOMaD help, nice profit, where do you stash your cash? RE is the safest bank in town, only one backed by Aust Fed reserve, both state and fed government with a 20+ year record of stupid gains.
        This only has to last long enough until they open the gates and backfill demand with supercharged immigration.

  3. Hill Billy 55

    Just got offered an “off market”inspection of a property in Toowoomba. With Queensland sales now at 50% above their weekly average pre covid and being so since August (that’s 9 months of sales), anyone who believes the lie that there is a shortage of properties for sale needs to get out of their nappies.

    • Moved to Toowoomba 20 odd years ago.

      It’s a lovely city…..though perhaps getting too busy at peak times for my taste.

      With your handle, I would suggest you would fit in nicely, if you so chose.

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