Mortgage demand plunges amid lockdowns

CBA has released internal data on lending, which shows that new mortgage lending eased in August amid lockdowns. The share of fixed rate lending also eased from recent highs:

  • New lending for housing eased in August, with housing activity dampened by the lockdowns.
  • The share of fixed rate lending remains high, but below recent peaks.
  • Lending for renovations continued to grow at a solid pace.
  • Lending to businesses has lifted over recent months as businesses draw down on existing facilities to support cash flow through the lockdowns.

New lending for housing eased in August. Lockdowns across NSW and Victoria in the month have dampened housing market activity, although prices have been resilient.

The share of fixed rate lending has eased for both owner-occupiers and investors as fixed rates have lifted a little. Nonetheless the share of fixed rate lending is still high.

Most fixed rate borrowers fixed at the two or three year horizon.

Lending for renovations is still growing at a solid pace.

Lending for household goods and cars has pulled back a little. Not surprisingly, given the backdrop of lockdowns and interstate border closures, lending for holidays is very low.

Business lending has lifted over recent months as businesses draw down on existing facilities to support cash flow through the lockdowns.

Usually, the fall in new mortgages would indicate slower price growth. However, it has been met with lower listings and likely sales volumes, which would support values.

Basically, the reduced demand amid lockdowns has been met with reduced supply. Both will rise once lockdowns are lifted.

Unconventional Economist

Comments

    • Jumping jack flash

      Everyone has the same problems as everyone.
      The difference is China doesn’t need these problems because they still produce useful things from raw materials and sell them to the world for profit.

  1. It’s not really reduced demand.

    Mortgage pre-approvals amongst brokers has gone up so hard during lockdown it’s insane.

    I spoke to an agent just yesterday. He had a property open on Saturday. 40 people booked in back to back for inspections – all pre-approved buyers.
    33 requested a contract of sale.

    Similar stories for other properties, mostly in median value or above suburbs (from my limited anecdata).

    I suspect demand will shoot straight back up once people can see the property they want to buy.

  2. I watched the Economic update from Shane Oliver of AMP Capital yesterday. The mantra of a housing shortage is so unbelievable. Whilst he was putting up a graphic which showed we have built more houses than demand for the past 6 years, and we are now in an oversupply situation of housing, he was still verbalising about the housing shortage.

    Let this be very clear, we have a housing surplus, and it will get bigger over the next 12 months due to the continued reliance on building to prop up our (wonderful) GPD figures, coupled with a shortage of appropriately qualified immigrants. It is no wonder that the politico/housing complex is demanding a rise in the immigration numbers.

    • Jumping jack flash

      “Surplus” or “shortage” (and “affordability”) are subjective terms and directly related to the single parameter of debt eligibility.

      If everyone is eligible for the amounts of debt required to buy all the houses, then there is a dire and critical shortage of houses and more must be built immediately so they can all be bought using the debt!

      If nobody is eligible for the amounts of debt required to buy all the houses, then there is a surplus of houses that remain unsold, and obviously those houses that are available are severely “unaffordable”.

      It swings from one to the other depending on the peoples’ debt eligibility.

      Debt-fueled demand is a wonderful and magical thing.

  3. Jumping jack flash

    Its down from a high. Still up overall.

    Also consider the fact that a lot of the impetus we have seen in mortgage debt lately was kicked off from the early access to super and cutting interest rates in response to COVID.

    That debt surge lasted far longer than I expected was possible, but it will end eventually.
    Every 2010-2015esque debt surge gets a 2017 – 2019 period of stagnation and deflation to bring it back to earth, while there is no support from the economy by way of price inflation and wage inflation to support the “new normal” house prices.

    The problem is the size of a minimum deposit is approaching the entire price of a house from 10 – 15 years ago, and houses were unattainable without using debt even then! Wages haven’t really budged either over that entire period, so who can afford to save the deposit?

    Only through grants and stimulus is it possible – if you don’t already own a house you can and want to sell to create the deposit for the next one, that is.

  4. Anecdata- The house over the road and up a few last sold for $520K in 2014. Apparently it just sold for over $3M. It was never listed for sale as far as I can establish. Buyer from Sydney. We are small coastal town between Port Macquarie and Coffs Harbour.

    Totally normal. Nothing to see here. Completely sustainable.

  5. What about every person is only allowed to have one house? So if you are a couple you could have two. The second house has to be available for rent with penalties if vacant for more than 3 months/ year. No foreign buyers. This way the rich will probably end up with high end houses rather than 10 rentals, and two beach house that are empty most of the year.
    The wealthy can compete for the top end of the market and thousands of house would come onto the market at a lower price. Hotels/ motels would make money again as there would be no air bnb’s, freeing up more housing. More capital might be shifted to productive ventures as well.
    Yes, a very simplistic thought, but does it have any merit?