First home buyers respond
to increased grant
Housing finance
The number of new housing loans rose by 1.3 per cent in November. The average new home loan stood at $254,000 in November, up 7.4 per cent on a year ago.
First home buyer interest picked up, with 11,665 contracts being signed in November up 17.8 per cent on a month ago and the best result since November 2007.
The value of investment loans fell by 6.1 per cent while owner-occupier loans rose by 1.4 per cent. Investment loans have now fallen by 27.3 per cent in annual terms with the rate of decline nearing the four year low reached in June.
What does it all mean?
It certainly is a good sign to see the latest round of housing finance data post a positive result albeit a meagre 1.3 per cent. After nine consecutive months of losses the number of new housing loans has posted two consecutive months of gains. Certainly it is early days but the signs are encouraging.
Last month we noted that the substantial rate cuts and the increased first homeowner grants had seen an increase in the amount of prospective homebuyers in the market place, and in November it seems a larger proportion of those potential homebuyers have signed on the dotted line. The number of first home buyers purchasing properties has posted the best result in a year and is up almost 20 per cent in just the last month.
The concerted effort by the government and the Reserve Bank is having the desired effect. And with rates expected to be eased further it is likely that activity in the housing sector should pickup. Job security remains the one major concern for the housing sector. If employment manages to hold up relatively well in coming months, the property sector should see a reasonable improvement.
No doubt the Reserve Bank would have been heartened by the improvement in the latest data. However with the global economy remaining in a dire state, further rate cuts and government stimulus will be necessary to support the domestic economy. CommSec expects further rate cuts of 50bps in February and April.
What do the figures show?
Housing finance: The number of owner-occupier housing loans rose by 1.3 per cent in November to 49,192 after rising by 1.4 per cent in October.
While construction loans fell by 0.3 per cent, the purchase of newly erected dwellings lifted by 9.8 per cent, loans for the purchase of established dwellings rose by 1.1 per cent, helped by a 2.9 per cent increase in refinancing.
The value of new commitments fell by 0.9 per cent in November to $17.5 billion. Investment loans fell by 6.1 per cent while owner-occupier loans rose by 1.4 per cent.
The value of home loans approved but not advanced rose by 1.6 per cent to a record high of $41 billion and stands 7 per cent up on a year earlier.
The average loan stood at $254,000, up 7.4 per cent on a year ago. The average loan by first home buyers jumped 1.3 per cent to $269,200 in November to stand 15.7 per cent higher than a year ago
What is the importance of the economic data?
Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. Roy Morgan conducts a survey of consumer confidence. Both surveys are aggregated from responses to questions on the current and likely future state of family finances, current and likely future state of the economy and whether it is a good time to buy a major household item. Confident consumers may be more inclined to spend, especially on major items.
Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
What are the implications for interest rates and investors?
The Reserve Bank still has much work to do in cutting rates as it needs to ensure that there is plenty of stimulus in place to shield the economy from the anaemic global economy. CommSec expects rates to be cut by another 100bps over the next three months.
Savanth Sebastian – Equities Economist (Author)
(612) 8223 7130 (work)
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