Talk of housing market recovery premature: AMP’s Shane Oliver

A 22% drop in first-home buyer numbers in January, most of which occurred in NSW, indicates that talk of a housing market recovery in December last year might have been premature, says AMP chief economist Shane Oliver.

In absolute terms ABS figures show the number of NSW first-home buyers fell from 4,280 to 2,686 (the lowest number since September 2011), while the size of the average first-home buyer mortgage dropped slightly from $297,000 to $295,000.

In comparison, in Victoria, where there have been recent changes to stamp duty concession rules, first-home buyer numbers fell relatively modestly from 2,276 to 1,905. Western Australia was the only state where the number of first-home buyers increased (rising slightly from 1,263 to 1,278).

The fall in NSW first-home buyers was accompanied by a 6.3% drop in NSW mortgage commitments following a 7.6% rise in December as NSW first-home buyers rushed to buy homes ahead of the December 31 cut-off for stamp duty concessions on existing properties.

Overall, the mortgage market dropped 1.2% over January, well below CommSec expectations of a 2% gain over the month.

Oliver says the December figures were heavily distorted by the NSW stamp duty concession deadline.

“Virtually all that has happened is demand has been pulled forward, and we’re still looking for the fundamental recovery to come,” he says.

SQM Research managing director Louis Christopher is also bearish about a recovery, currently “neutral to negative about any type of rebound in approvals for February”.

“We believe the independent rise in lending rates by the major banks dented sentiment for the month, which has transpired into soft auction clearance rates in Sydney and Melbourne for this time of year. It is possible though that there may be a continued recovery in housing finance approvals for states such as Western Australia,” he says.

According to Christopher, when you exclude refinancing from the equation NSW mortgage commitments actually fell by greater than 6.3%.

“Unfortunately the ABS does not provide a state breakdown excluding refinancing, so there is a bit of guess work there,” he says.

December quarter figures released by Real Estate Institute of Australia (REIA) today show the two rate cuts of November and December helped push up house prices by 0.7% over the three months (0.1% for other dwellings), with Melbourne the biggest beneficiary with a 1.9% gain in house prices to $550,000.

However, the Australian weighted average median house price of $522,696 was 3.2% lower compared to the December quarter 2010.

Over the year, median prices declined for both types of dwellings. Compared to the same quarter of 2010, the median house price decreased 3.2%, while the median house price for other dwellings recorded a 1.0% decline.

Click to enlarge

Source: REIA

All other key figures in the January ABS figures indicate momentum has dropped out of the mortgage market.

The value of new home loans in January fell by a seasonally adjusted 2.3% following rises of 3.8% in December and a 2.1% rise in November helped by the two RBA rate cuts.

Loans for investment housing fell 7.1% after rising strongly by 7.5% in December and by 1.8% in November.

Loans to owner-occupiers were stagnant in January, following a rise or 2.3% in December and a 1.4% gain in November.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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