The latest Australian mortgage finance data from the Australian Bureau of Statistics (ABS) recorded heavy falls in new owner-occupier and investor mortgages, which according to Westpac is indicative of a “deepening and broadening housing market correction”:
New mortgage demand has collapsed.
Regular readers will know that the value of new mortgage commitments (excluding refinancings) is a strong leading indicator for house prices, as illustrated clearly in the next chart:
Where mortgage demand goes, house prices typically follow.
New mortgage growth is strongly correlated with house price growth, with mortgages typically leading house prices by between three and six months.
Accordingly, the latest crash in mortgage commitments portends ongoing house price falls at the national level.
The same forces are at play across Australia’s major capital cities.
Sydney mortgage growth collapsed by 30% in the year to November, which dragged house prices down 12% in the year to December 2022:
Sydney mortgage demand and house prices collapse.
Melbourne mortgage growth tanked by 25% in the year to November, which pulled house prices down 8.1% in the year to December 2022:
Mortgage demand and house prices down sharply across Melbourne.
Finally, Brisbane mortgage growth was down 23% in the year to November, which has finally pulled annual house price growth into negative, with heavy losses to come:
Brisbane mortgage demand and house prices go from boom to bust.
As noted by Westpac this week, “there is little let-up in sight with other updates showing the housing market correction remains firmly entrenched and the RBA expected to continue ratcheting rates higher in early 2023”.
With the RBA almost certain to lift mortgage rates higher, buyer demand will inevitably shrink, dragging house prices further into the red.
