As regular readers know, I consider the growth in new mortgage commitments to be the key short-term indicator for property prices.
The latest ABS housing finance data for November, released on Friday, showed that mortgage growth slowed sharply over the prior six months. This suggests that dwelling value growth should slow given most homes in Australia are purchased with a mortgage.
The next chart plots the ABS’ quarterly mortgage growth against CoreLogic’s 5-city dwelling values index. This shows the strong correlation between mortgages and prices; albeit with mortgages typically leading prices by around two quarters:
The same data is plotted below on an annual growth basis:
Quarterly dwelling value growth peaked way back in May 2021, whereas annual dwelling value growth has only just moved past peak. Both price peaks were signaled ahead of time when mortgage growth slowed.
Below are the same quarterly and annual growth charts across the five major capital city markets.
Clearly, Melbourne, Sydney and Perth are slowing in line with the mortgage data.
By contrast, Brisbane and Adelaide are outliers with prices moving independently of mortgage growth. Despite mortgage demand falling significantly across both markets, price growth has surged to cyclical highs.
My guess is that buyers from Sydney and Melbourne are buying a lot of properties in Brisbane and Adelaide with cash, which is not contributing to mortgage growth but is pushing prices higher.
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