Housing finance data sees mixed responses
The much anticipated housing finance figures for December from the Australian Bureau of Statistics were released this week, and saw an interestingly mixed number of responses.
The drop in the number of home loan approvals had 1300HomeLoan’s managing director John Kolenda saying that this softness highlights the need for the Reserve Bank of Australia to remain on the sidelines.
Meanwhile, ANZ research’s Paul Braddick and David Cannington pointed to the strength and “solid up-trend” being seen in the market, while noting that the RBA is likely to stay on hold for some time.
And Real Estate Institute of Australia (REIA) president Peter Bushby pointed to the lowest monthly increase, in trend terms, for the number of owner-occupied finance commitments in the past 12 months.
Kolenda said that the RBA needs to be cautious not to dampen the current environment, particularly in terms of consumer sentiment.
“The RBA should leave rates where they are for at least the next six months until we see an improvement in other sectors such as unemployment, which remains an area of concern,” he said.
“Any premature increase in rates is likely to change consumer sentiment back to being conservative.”
Braddick and Cannington’s research said that despite improvement in consumer sentiment through the second half of 2013, and strong retail sales in recent months, interest rates are expected to stay low for an extended period.
“Combined with strong population gains and pent-up home buyer demand, we expect this will maintain solid growth in home sales, prices and finance through 2014. Moreover, rapid growth in finance for residential construction and the purchase of new dwellings foreshadows further gains in building activity into 2014,” they explained.
Further gains are also reflected in elevated clearance rates and the momentum in house prices they said, with further gains in finance commitments expected.
New South Wales is currently leading other states in terms of housing finance growth, likely reflecting the hot market experienced by Sydney last year, with investor finance up 47% over the year to November and owner occupier numbers appearing strong – though they noted it was at half this rate.
Bushby agreed that investors were continuing their strong presence in the market, with almost three years of consecutive increases now being recorded.
He also pointed to the increase of first home buyer commitments, from a record low.
“The proportion of first home buyers in the number of owner occupied housing finance commitments rose from its historically lowest point of 12.3% in November 2013 to 12.7% in December 2013. The figure is alarmingly lower than the long-run average proportion of 19.9%, despite eight interest rate cuts since November 2011,” he said. First home buyer numbers have been slumping for some time, according to this data.
“December 2013 results highlight the need for Government to act on housing affordability and to stem the rapid decline in the number of first home buyers."
Premier of Tasmania, Lara Giddings, thinks that the strength of first home buyer numbers in Tasmania is attributable to the $30,000 First Home Builder Boost, with new loans to first home buyers up 20.4% for the year.
“Since the First Home Builder Boost was increased to $30,000 late last year there have been more than 70 successful applicants," Giddings said.
“That is on top of the 250 that received the $15,000 grant that formed part of the original Jobs Package."
See over page for data breakdown
The raw data
Trend estimates (percentage change from November 2013 to December 2013)
VALUE OF DWELLING COMMITMENTS
Total dwellings: 1.8
Owner occupied housing: 1.0
Investment housing - fixed loans 3.0
NUMBER OF DWELLING COMMITMENTS
Owner occupied housing: 0.3
Construction of dwellings: 1.1
Purchase of new dwellings: -1.1
Purchase of established dwellings: 0.3
Seasonally adjusted estimates (percentage change from November 2013 to December 2013)
VALUE OF DWELLING COMMITMENTS
Total dwellings: 0.1
Owner occupied housing: -1.5
Investment housing - fixed loans 2.9
NUMBER OF DWELLING COMMITMENTS
Owner occupied housing: -1.9
Construction of dwellings: 0.4
Purchase of new dwellings: -1.9
Purchase of established dwellings: -2.2
Source: Australian Bureau of Statistics
Last month’s housing finance data was also said to be a “mixed bag”. You can see the industry responses to that data set here.
What are your thoughts on the housing finance data? Head to the full data available on the Australian Bureau of Statistics for more detailed breakdowns.