First-home buyer mortgages up in December thanks to December NSW stamp duty deadline

The NSW government’s decision to restrict first-home buyer stamp duty concessions to new homes or vacant land from January 1, 2012 helped drive a seasonally adjusted 3.8% increase in mortgage lending in December and a 7% increase in first-home buyer mortgages, according to December ABS housing finance data.

The number of commitments for owner-occupied housing finance rose 2.3% over December.

First-home buyer mortgages are up 38% since mid-2011, while finance to upgraders was broadly flat in the month and over the last six months.

Dylan Eades, economic analyst at ANZ, describes the headline number as “encouraging” but urges caution because it was “most likely boosted by the bring-forward of NSW activity ahead of the removal of the first-home buyer stamp duty concessions”. 

The end to the stamp duty concession also boosted NSW mortgage commitments, which rose by 6.1% in December and are 11% higher over the past two months. 

“Given that much of this growth has been driven by first home buyers, we are anticipating a mild retracement in NSW activity at the beginning of 2012,” says Eades.

New lending to owner-occupiers excluding refinancing rose 8.7% in the final quarter to be 4.6% higher through the year.

“Recall that it was a weak start to the 2011 year, on the back of the RBA's November 2010 rate hike and flood disruptions,” commented Westpac economist Andrew Hanlon.
 

Hanlon also noted that NSW outperformed the market with mortgage commitments up 23% for the half year “as stamp duty changes to take effect from January 2012 triggered a bring-forward”.

Fixed-interest loans for investment purposes increased 7.5% during December to $7.1 billion following a 2.7% increase in November.

However, Hanlon says this type of financing can be volatile and notes that “the investor market was relatively subdued throughout 2011, with finance up just 1.8% for the year, against the backdrop of generally softer house prices”.

On a seasonally adjusted basis, demand for owner-occupier mortgages in Queensland was up 6.9% in the month, following a 2% rise, but still ended the 2011 year down by 1%. Victoria and WA reported a 1.3% gain, while SA and Tasmania reported falls.

Master Builders Australia describes the increase in housing finance in December as a positive sign but says it needs to be sustained.

“The key finance indicator released today by the ABS shows that demand for new dwellings is showing early signs of a pick-up in response to the interest rate cuts in November and December last year,” says Peter Jones, MBA chief economist.

“Loans for construction of dwellings and purchase of new dwellings, combined, were up 2.1% in December, and there was an encouraging lift in investment-related construction loans.”

“Finance commitments remain weak by historical standards, but the housing market is beginning to pick itself off the floor as the bring-forward effect of the government’s boost scheme fades and first-home buyers respond to lower interest rates and more affordable house prices.”