ABS 5609.0 - Australian housing finance lifts in July for seventh consecutive month; Signs of a strong recovery, housing finance lifts, rate rise back on agenda
No. of dwelling commitments, Owner occupied housing
Quote:
JULY KEY POINTS
VALUE OF DWELLING COMMITMENTS
July 2013 compared with June 2013:
The trend estimate for the total value of dwelling finance commitments excluding alterations and additions rose 0.9%. Owner occupied housing commitments rose 1.0% and investment housing commitments rose 0.8%. In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 1.1%.
NUMBER OF DWELLING COMMITMENTS
July 2013 compared with June 2013:
In trend terms, the number of commitments for owner occupied housing finance rose 1.6%. In trend terms, the number of commitments for the purchase of established dwellings rose 1.8%, the number of commitments for the purchase of new dwellings rose 1.4% and the number of commitments for the construction of dwellings rose 0.2%. In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 14.7% in July 2013 from 15.1% in June 2013.
The housing industry is showing more signs of a strong recovery that could put a rise in official interest rates back on the Reserve Bank agenda.
The total value of dwelling commitments rose 1.1 per cent in July 2013, to $24.1 billion, seasonally adjusted.
The number of commitments for purchase of new dwellings and purchase of established dwellings both rose, in seasonally adjusted terms, although there was a dip in the number of commitments for construction of new dwellings.
Housing finance grew significantly in 2013. The value of dwelling commitments for owner-occupied housing has risen each month in 2013 and in July was 14 per cent higher than in July 2012. The value of investment housing commitments seasonally adjusted rose 2.9 per cent in July 2013.
The demand for home loans rose more than expected in July, according to the Australian Bureau of Statistics.
The data showed the number of home loans granted in July lifted a seasonally adjusted 2.4 per cent to 52,204.
The result compares to a downwardly revised 50,983 in June.
Bloomberg had expected the number of housing finance commitments to rise by two per cent in July.
Total housing finance by value rose 1.1 per cent in July, seasonally adjusted, to $24.81 billion.
JP Morgan economist Ben Jarman said that although the figures came in stronger than expected, the rise was being driven by investors rather than first-home buyers, who typically take out bigger loans.
"Average loan sizes are falling," Mr Jarman said.
"At the same time, what you're getting is activity that is tilted more towards the investor and less toward the first-home buyer, so you're not getting that uplift in overall credit growth that you get when first-home buyers come into the market.
"It seems like there's a lot of turnover happening in housing but not enough homes being built and not enough credit growth to make it genuinely stimulatory.
"Without that piece of the puzzle moving we don't think this will really change the path of the real economy."
Mr Jarman said one barrier to growth was the high cost of building.
But the wind-down in the mining investment boom would eventually free more resources for the home building sector which would bring prices down, he said.
CommSec chief economist Craig James said he expects the housing market to make more gains as consumer and business confidence improves now that the federal election is out of the way.
"What we are seeing is more commitments being made, but budding buyers are taking their time to make a purchase," he said.
"What we would hope that, in a more settled environment, people will start spending, investing and hiring."
Loans made for the purchase of new dwellings rose 5.9 per cent in the month but loans for the construction of dwellings fell 2.1 per cent.
"If newly erected dwellings are being purchased that will reduce the amount of inventories and should encourage further construction," Mr James said.
"Certainly we should have construction rising at a faster rate than established dwellings so we don't get caught with unsustainable growth."
Mr James said the data and continued signs of strength in the housing sector will ensure that the Reserve Bank will hold off on another interest rate cut until 2014.
We bears need to accept we were wrong. It’s not fair. It’s not right. But it’s reality. The housing speculators have once again been bailed out by low interest rates.
The horse has bolted. Rates can’t be raised fast enough, because to do so would destroy what credibility the RBA has remaining, is politically untenable, and would cause huge damage to the non-housing economy. They can’t raise rates fast enough, it’s too late now. In a years or two time we’ll all be looking at house prices up another 20-30% and wondering what happened.
Hopefully we’ll get another chance in a few years once interest rates are up a few percent, and since house prices will be at least 30% higher by then, the crash, if it does come, is likely to be worse.
They simply can’t raise rates fast enough to put a lid on this before prices rise substantially. It’s not feasible. It won’t happen. Rates will stay low for at least another year or two which translates into another 20% growth at least for 2014 and 2015 (on top of the 10% growth in 2013).
I think bears are going to be thin on the ground for the next few years. The punters are storming back into property, and Tony’s election win will just give them even more confidence. We’re looking at least 2-3 years down the line before the RBA can get rates up high enough to put a lid on this. I can see house prices up another 30% or more before this madness ends.
Open house inspections in Sydney are just crazy, you can barely get in the door and they’re sold in a week. We’re back to the early 2000s where everyone had to chase the market up just to get on the ladder
We’re heading for the Mother of All Housing Booms 2.0. It’s not good for society but it’s unavoidable now. The RBA has painted itself into a corner and can’t reverse fast enough to get us out of this.
In retrospect, 2011-2012 will turn out to have been good times to buy property as there were bargains around for a couple of years, but those have all but vanished now and any price falls have been fully reversed nationally according to ABS. OK prices are still down in “real” terms, but that’s cold comfort unless you’ve had pay rises in excess of CPI inflation, and with the way things are going prices will even be up in real terms within a year or two. Personally I wish I’d listened to my fiancee and bought two years ago, but I was overly swayed by the bear arguments regarding a persistent “slow melt” at the time (which did have some merit, but in retrospect didn’t account for how sensitive the housing market is to rate cuts).
Now we housing bears need to wait it out for another few years until the RBA decides to put the brakes on.
Yes, the jobless rate has been rising for over a year now, but that is coinciding with house prices which have also been rising for over a year. Unemployment is doing nothing to prevent the house price inflation with interest rates so low. Look at the jobless rate in the UK and house prices are still rising.
We bears need to accept we were wrong. It’s not fair. It’s not right. But it’s reality. The housing speculators have once again been bailed out by low interest rates.
Yes, the jobless rate has been rising for over a year now, but that is coinciding with house prices which have also been rising for over a year. Unemployment is doing nothing to prevent the house price inflation with interest rates so low. Look at the jobless rate in the UK and house prices are still rising.
A confident housing sector is great news for employment.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Total lending on houses has continued to grow steadily according to the Australia Bureau of statistics, but The Real Estate Institute of Australia says first home buyers are missing out.
The number of owner-occupied finance commitments rose by 1.6% – following increases of 2.1% in June and 2.4% in May, in trend terms, according to the ABS.
If refinancing is excluded the increase for July, is 1.5%, in trend terms.
The value of investment housing commitments rose by 0.8% in July in trend terms, the 12th consecutive monthly increase.
Every state had increases in owner-occupied finance commitments with the largest increases in the ACT and Queensland, up 2.0% and 1.9% respectively in trend terms.
The purchase of established dwellings is up 1.8% in trend terms, the purchase of new dwellings is up 1.4% in trend terms and the number of commitments for the construction of new dwellings is up 0.2% in trend terms.
But the proportion of first home buyers in the number of owner-occupied housing finance commitments fell to 14.7% compared to 15.1% in June.
“The figure remains persistently low compared to the long-run average proportion of 20.1 per cent despite seven interest rate cuts since November 2011,” says REIA’s Peter Bushby.
“In large part, this drop can be attributed to state governments withdrawing previous levels of support for first home owners buying established dwellings and it is established dwellings that 80% of first home buyers prefer.
“With the proportion of first home buyers remaining consistently below the long term average, this needs to be a high priority issue for the incoming Government.”
Westpac’s Matthew Hassan’s the results are broadly positive save for continued subdued first home buyer activity and a more mixed month for construction-related approvals.
“Stepping back from the monthly detail, finance approvals are starting to show a clear response to low interest rates. The upturn has been much slower to come through than previous cycles and remains of middling strength,” Hassan says.
“It is also showing a much more muted pick up in housing credit (+5.3% per year in July). The implication is that the rise in new lending is being mostly matched by a rise in repayments on outstanding loans.
“Some of that may be a byproduct of low FHB activity but it also likely reflects consumers' aversion to taking on additional debt.”
The Housing Industry Association says the results for construction finance are disappointing with the number of loans for construction fell by 2.1% to be only 1.1% higher than a year earlier.
“This is a good result, but the lack of strong upward momentum for the construction component over 2013 to date is disappointing,” says HIA’s Geordan Murray.
“The aggregate value of lending for housing increased by 4.5% in the July 2013 quarter. There has been strengthening demand from both owner occupiers and investors, which in itself is encouraging, but growth has been driven primarily by lending to those purchasing existing homes.
“The value of lending to owner occupiers for construction and the purchase of new homes increased by 2.5 per cent, while lending to investors purchasing new homes increased by 3.3 per cent in the July quarter of 2013. Despite this, the total increase in lending for new homes only contributed 0.5 percentage points to the quarterly growth.”
A confident housing sector is great news for employment.
yes, just look to Spain and Ireland for recent examples of this.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
We bears need to accept we were wrong. It’s not fair. It’s not right. But it’s reality. The housing speculators have once again been bailed out by low interest rates.
The horse has bolted. Rates can’t be raised fast enough, because to do so would destroy what credibility the RBA has remaining, is politically untenable, and would cause huge damage to the non-housing economy. They can’t raise rates fast enough, it’s too late now. In a years or two time we’ll all be looking at house prices up another 20-30% and wondering what happened.
Hopefully we’ll get another chance in a few years once interest rates are up a few percent, and since house prices will be at least 30% higher by then, the crash, if it does come, is likely to be worse.
They simply can’t raise rates fast enough to put a lid on this before prices rise substantially. It’s not feasible. It won’t happen. Rates will stay low for at least another year or two which translates into another 20% growth at least for 2014 and 2015 (on top of the 10% growth in 2013).
I think bears are going to be thin on the ground for the next few years. The punters are storming back into property, and Tony’s election win will just give them even more confidence. We’re looking at least 2-3 years down the line before the RBA can get rates up high enough to put a lid on this. I can see house prices up another 30% or more before this madness ends.
Open house inspections in Sydney are just crazy, you can barely get in the door and they’re sold in a week. We’re back to the early 2000s where everyone had to chase the market up just to get on the ladder
It can be a rude awakening. I was bearish a few years ago when i should have been bullish and it cost me dearly. It didn't feel nice for us when prices were rising faster than 2 wages (and they were) but what can you do?
the price of money matters
mel from melbourne :pop:
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
The number of home loans approved has risen for the seventh month in a row, showing the housing sector continues to strengthen.
There were 52,204 approvals in July, compared to 50,983 approvals in June - a rise of 2.4 per cent, the Australian Bureau of Statistics said.
Economists were expecting a 2 per cent rise.
CommSec chief economist Craig James said he expects the housing market to make more gains as consumer and business confidence improves now that the federal election is out of the way.
‘‘What we would hope that, in a more settled environment, people will start spending, investing and hiring,’’ he said.
‘‘Of all the sectors in the economy, clearly one of the healthiest is housing.
‘‘Housing is best placed to take over the leadership role from mining as the nation’s key economic driver."
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