Australian Housing Finance Fell In March As Property Prices Continued To Climb

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Both the value and number of housing finance commitments fell in March according to data released today by the Australian Bureau of Statistics.

Seasonally adjusted, the value of finance fell 1.1% to $27.346 billion in the month while the number of new loans fell 0.9% to 52,013. The data is weaker than the market had forecast according to Westpac’s weekly which said the market was looking for a rise of 0.5%.

The ABS has a somewhat confusing way of reporting data with some figures seasonally adjusted and others in trend terms but the market will note that the investment housing demand (in trend terms) saw increases “in commitments for the purchase of dwellings by others for rent or resale (up $36m, 3.5%), commitments for the construction of dwellings for rent or resale (up $8m, 1.2%), while the purchase of dwellings by individuals for rent or resale was flat. The value of investment housing commitments seasonally adjusted fell 0.8% in March 2014”.

The data, and the chart below, highlights two things.

  • Total housing finance is still very strong and at record levels; and
  • As much as the focus is on a lack of first home owners and investors this is really a refinancing boom with borrowers and lenders churning their loans from one institution to another

But highlighting the good news in the recent increase in property prices (the ABS released data this morning showing that its House Price Index rose 1.7% in the March quarter) has another side to it. The average size of loans, both for first home buyers and non first home buyers continues to sit near recent highs.

This is important economically because with Australian household debt is still up near all time highs according to the RBA and it makes Australia and Australian households vulnerable to what seem like inevitable RBA rate hikes.

It also means that as demand for debt and house prices rises it might moderate in the months and quarter ahead.

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