Consumer credit demand still soft but mortgage enquiries rise for first time since GFC.
Overall consumer credit demand down by 4.8% year on year Credit card applications down by 8% Personal loan applications decline by 1.4% but strong lift in Western Australia Mortgage enquiries increase of 1.5%, the first rise in eight quarters
Sydney, Australia: 24 April 2012 - The results of Veda's Consumer Credit Demand Index for the first quarter of 2012 show a continued decline in consumer credit demand year on year but also the first increase in mortgage enquiries since 2009. Veda is Australasia's leading provider of commercial and consumer data intelligence and insights.
Mortgage enquiries increased for the first time in eight quarters, increasing by 1.5% year on year. Year on year mortgage enquiries showed a solid increase in QLD (10.2%), NT (9.7%) and WA 6.6%) which indicates that mortgage enquiries may be stabilising.
Mortgage enquiries in NSW dropped sharply (-7.6%) in the March quarter when compared to the December 2011 quarter, a reflection of the expiration of stamp duty exemptions in NSW at the end of last year which resulted in a pull forward of first home buyer demand followed by a drop in the first quarter of 2012.
"Turning points in mortgage enquiries usually occur one to three quarters ahead of turning points in house prices, an early warning sign which could indicate that after a continued decline, mortgage enquiries may have bottomed out. Veda mortgage enquiries are closely related to the number of housing finance approvals so this is a trend to watch, particularly if you are hoping for a future pick-up in house prices," Mr Luffman commented.
"In terms of state by state mortgage activity we are seeing different trends play out with NSW mortgage enquiries being affected by the expiration of stamp duty and Queenslanders starting to bounce back after a challenging year," Mr Luffman added.
Credit Card applications declined sharply in SA (-12%), NSW (-11.3%) and Victoria (-8.8%) over the last year while the decline is less severe in Queensland (-1.6%) and WA (-4.2%). In part, the weakness in credit card applications reflects the rise in the use of debit cards and the introduction of responsible lending laws in 2011, which has led to more steps being added to credit card application processes.
Personal loan applications decreased 1.4% year on year with reduced demand in all states in the March quarter with the exception of for WA and ACT. In sharp contrast to other states, personal loan applications surged in WA (+8.3%) year on year while weakness in personal loan applications was particularly evident in TAS (-7%), NSW (-4.4%) and SA (-3.4%).
"Australian households have spent the post-GFC period firmly in saving rather than spending mode and the results show that consumers are still cautious about taking on credit, " said Mr Luffman. "While applications for credit cards and personal loans have both declined, the reduction in card applications is far greater, showing that they are increasingly falling out of favour with consumers as households continue to focus on saving. However, the results indicate that Australia's two-speed economy is still in effect with consumer credit demand significantly stronger in the mining states," Mr Luffman added.
Compiled by Veda since 2004, the Consumer Credit Demand Index is a quarterly analysis of changes in consumer demand for credit cards, personal loans and mortgages across Australia.
Agreed. A rise is a rise. At this stage though, I doubt that it will still be rising in six months time. If it's looking solid by the end of Q1 next year, I will have some serious re-thinking to do.
The rise in WA makes sense to me, given the influx of high-paid workers as the resource boom continues to gear up (while on the national picture, inflation and employment growth remain subdued - where is this huge flow on that has supposed to have been occurring?)
Similar story for QLD.
Also, the NT does have some significant mining operations and given the territory's tiny population, I don't think it would take a huge number of incoming mining workers to significantly boost enquiries, since they expressed in percentage terms.
Agreed. A rise is a rise. At this stage though, I doubt that it will still be rising in six months time. If it's looking solid by the end of Q1 next year, I will have some serious re-thinking to do.
The rise in WA makes sense to me, given the influx of high-paid workers as the resource boom continues to gear up (while on the national picture, inflation and employment growth remain subdued - where is this huge flow on that has supposed to have been occurring?)
Similar story for QLD.
Also, the NT does have some significant mining operations and given the territory's tiny population, I don't think it would take a huge number of incoming mining workers to significantly boost enquiries, since they expressed in percentage terms.
Lefty - I really doubt that we will see runaway house prices except in isolated circumstances. My point was more that we are not seeing a wholesale nationwide crash, although some areas will be a bit shaky. I can't see the market as being better than ok for a long time, and it could curl up it's toes next year if conditions change.
Any expressed market opinion is my own and is not to be taken as financial advice
A pick-up in mortgage inquiries for the first time in two years could be an early indicator that house prices will recover in future months.
Research by lending data provider Veda shows that while overall consumer credit demand remains soft, home loan inquiries rose 1.5 per cent in the year ending March - the first annual rise since the 2008-2009 global financial crisis.
"Turning points in mortgage inquiries usually occur one to three quarters ahead of turning points in house prices," Veda head of consumer risk Angus Luffman said on Tuesday.
"This is a trend to watch, particularly if you are hoping for a future pick-up in house prices."
However, in the three months to the end of March there were significant differences in mortgage demand between states.
Western Australia surged by 7.6 per cent, but NSW plunged by 7.6 per cent after stamp duty exemptions expired at the end of last year.
Overall credit demand fell by 4.8 per cent in the year to March, with credit card applications tumbling by 8 per cent and personal loan applications down 1.4 per cent.
"Australian households have spent the post-GFC period firmly in saving rather than spending mode, and the results show consumers are still cautious about taking on credit," Mr Luffman said in a statement.
He said weakness in credit card demand reflected a rise in debit card usage and the introduction of responsible lending laws in 2011, which added more steps to the application process.
It also highlights Australia's two-speed economy, with applications dropping sharply over the year in South Australia (down 12 per cent), NSW (11.3 per cent) and Victoria (8.8 per cent).
However, declines were less severe in the mining states of Queensland (down 1.6 per cent) and Western Australia (down 4.2 per cent).
Likewise, demand for personal loans fell in all states over the year, apart from Western Australia (up 8.3 per cent) and the Northern Territory (up 1.7 per cent).
Mortgage enquiries increased for the first time in eight quarters, according to the latest Consumer Credit Demand Index from consumer credit agency Veda, led by strong gains in Queensland, WA and the Northern Territory.
During the March 2012 quarter, mortgage inquiries increased by 0.2% to be up 1.5% year on year.
There were solid increases in Queensland (up 4.4% for the quarter, 10.2% year-on-year), NT (up 4.7% for the quarter, 9.7% year-on-year) and Western Australia (up 7.6% for the quarter, 6.6% year-on-year) indicating that mortgage enquiries may be stabilising.
Mortgage enquiries in NSW dropped sharply (-7.6%) in the March quarter, the only state or territory to record a year-on-year quarterly decline, “a reflection of the expiration of stamp duty exemptions in NSW at the end of last year which resulted in a pull forward of first home buyer demand followed by a drop in the first quarter of 2012”.
During the past 12 months NSW mortgage enquiries are down 0.7%.;
Victorian mortgage enquiries increased by 2.3% over the quarter, but are still down 2% year on year.
South Australian enquiries increased by 3.1% over the quarter but are down 3.2% for the year. Click to enlarge
"Turning points in mortgage enquiries usually occur one to three quarters ahead of turning points in house prices, an early warning sign which could indicate that after a continued decline, mortgage enquiries may have bottomed out,” says Angus Luffman, head of consumer risk at Veda.
“Veda mortgage enquiries are closely related to the number of housing finance approvals so this is a trend to watch, particularly if you are hoping for a future pick-up in house prices.
"In terms of state by state mortgage activity we are seeing different trends play out with NSW mortgage enquiries being affected by the expiration of stamp duty and Queenslanders starting to bounce back after a challenging year," he adds.
Credit card applications declined sharply in SA (-12%), NSW (-11.3%) and Victoria (-8.8%) over the last year, while the decline is less severe in Queensland (-1.6%) and WA (-4.2%). In part, the weakness in credit card applications reflects the rise in the use of debit cards and the introduction of responsible lending laws in 2011, which has led to more steps being added to credit card application processes.
Overall credit demand rose 1.2% over the quarter with credit card applications up 2.7% and personal loans down 0.3%.
Compiled by Veda since 2004, the Consumer Credit Demand Index is a quarterly analysis of changes in consumer demand for credit cards, personal loans and mortgages across Australia.
Personal loan applications decreased 1.4% year on year, with reduced demand in all states and territories in the March quarter with the exception of WA and ACT. In sharp contrast to other states, personal loan applications surged in WA (+8.3%) year on year while weakness in personal loan applications was particularly evident in Tasmania(-7%), NSW (-4.4%) and SA (-3.4%).
"Australian households have spent the post-GFC period firmly in saving rather than spending mode and the results show that consumers are still cautious about taking on credit, " says Luffman.
"While applications for credit cards and personal loans have both declined, the reduction in card applications is far greater, showing that they are increasingly falling out of favour with consumers as households continue to focus on saving. However, the results indicate that Australia's two-speed economy is still in effect with consumer credit demand significantly stronger in the mining states," Luffman adds.
Compiled by Veda since 2004, the Consumer Credit Demand Index is a quarterly analysis of changes in consumer demand for credit cards, personal loans and mortgages across Australia.
Lefty - I really doubt that we will see runaway house prices except in isolated circumstances. My point was more that we are not seeing a wholesale nationwide crash, although some areas will be a bit shaky. I can't see the market as being better than ok for a long time, and it could curl up it's toes next year if conditions change.
No worries Peter, I understand your point of veiw. I was just putting forward mine, I wan't insinuating that you were forwarding the notion of another nationwide price boom about to go gangbusters.
One small piece of information that may not be understood by everyone about this Veda info.
Absolutely no one contacts Veda to enquire about a home loan. Veda are a credit reporting agency, so when they receive an enquiry, it is because a lender has accepted an application, and that lender is performing a credit check on the applicant.
So effectively if the level of Veda enquiries picks up or falls, it's directly because the level of applications for home loans has picked up or fallen.
What they can't tell you is what the proportion of refinance enquiries is included in that. They could do that if they changed their system very slightly, but as of now they haven't done that.
It is pleasing to see levels of personal finance enquiries falling, although that will affect the retail sector.
Any expressed market opinion is my own and is not to be taken as financial advice
From a WA point of view this confirms what we are seeing over here and what WA treasury deparment is reporting. http://www.treasury.wa.gov.au/cms/uploadedFiles/_Treasury/Economic_Data/housing_finance_feb2012.pdf?n=9938 Lending commitments exclusing refinancing increased by 9.5% in February from the same peroid last year. When you include refinance and new home construction loans this figure increases to 21.4% for February. March shows an even greater increase to 24% increase in lending commitments.
This data backs up other data on 1st home buyers, which the WA treasury reports increased "paid" grants in march was 15% higher in 2012 then march 2011. On a yearly basis First Home Buyer Grants are up 35% on a year ago. This is paid grants not applications, the level of applications was higher again. http://www.treasury.wa.gov.au/cms/section.aspx?id=550
What this data also shows is the medium price paid for a 1st home owner was $420,000. The last time the medium 1st home owner price was this high was when home medium home prices were over $500,000. If this does pan out over the next few months, it would mean perth medium house prices have increased from a low of around $450,000 to over $500,000. Early data from landgate show medium house prices at $495,000 but on incomplete data. Complete march figures from landgate will tell us a great deal on how quickly prices are risig. If we are anywhere near the $500,000 price range, it would mean medium perth house prices have increased close to 10% in the last 6 months. My estimate for 7-9% for the full year of 2012 could now be to low, I did not see such a strong come back from 1st home buyers on the cards, rather a steady buildup. Not this huge 15% spike in one month. This could indicate the rental situation in perth is much worse then reported forcing more people to opt to buy rather then rent. The next few months will be very important to watch perth closely. The only problem is if landgate does report medium prices around $500,000, you already missed out on a 10% jump in medium values, im sure there is more to come as perth is undervalued considering our mining boom and prices relative to other capitals.
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