Yesterday’s housing finance data showed that monetary policy is working and that Australians are back borrowing.
The hope of course is that the low rates that have fueled this renewed appetite for debt will also lead to more spending in the economy, more construction in housing and help the economy transition from the mining investment boom of the last five years to something more domestically driven.
But the risk in interest rates at generational lows is that it reignites a housing bubble.
That’s the fine line the Reserve Bank and Governor Stevens are trying to walk, but the data is suggesting that perhaps the housing boom of 2013 might be morphing into a bubble.
Take the exclusion of first home owners from the market. ABS data yesterday showed that non-first home owners continue to dominate the market, marking a new all-time high as a percentage of all housing finance of 87.7%.
This is a level not seen since the run-up to the bubble the RBA likes to say it popped back in 2003. Like 2003, the rise in prices seems once again to be led by house price rises in Sydney.
But the potentially more concerning news for the RBA and APRA is that the average loan size for both first home owners and non-first home owners is rising again. Indeed, both are at new all-time highs, with the rise in non-first home owners of 2.78% to $322,200 in just one month of great concern and a potential sign that buyers are chasing prices with more debt.