Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

'Must-read, must-follow, one of the finest property analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for in-depth analysis' - David Scutt, Business Insider.

"I've been investing 40 years yet I still learned new concepts; one of the finest young commentators" - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate - loads of good data & charts, the most comprehensive analyst I follow in Australia...follow Pete Wargent' - Jonathan Tepper, Variant Perception, 2 x NYT bestseller.

'Superlative work' - Grant Williams, founder RealVision.

Saturday, 16 January 2016

Housing finance wallops expectations

Rebound

Total Housing Finance in raw original terms battered all expectations for the month of November, with total dwelling finance $34.8 billion having been outpointed only twice across the entire history of the data series.

In seasonally adjusted terms, owner-occupier finance increased by some +2.4 per cent in the month, while investor lending surprised analysts in increasing for the first time for the first time since April, up by +0.7 per cent to $11.6 billion (although now sitting comfortably below the all-time peak of $14.2 billion).

The value of borrowing by upgraders and downsizing homebuyers is now outstripping that of investors, and these will be key sectors of the market going forward. 


Drilling down a level and instead looking at the smoother "trend" data it can be seen that changes to lending terms have encouraged money to follow the path of least resistance, resulting in a strong increase in owner-occupier borrowing which has offset the decline in investor activity.


Perhaps significantly, with the pace of investor credit growth having tailed off sharply - in part due to loan reclassifications - we may be set to see lenders looking to compete in the investor space again sooner than expected.


This week Suncorp announced that it was decreasing deposit requirements for investors back to 10 per cent while simultaneously cutting rates on investor loans, and AMP is set to cut investor loan rates sharply by 35 to 40 basis points to just 4.57 per cent, effective from Monday. 

This suggest that banks may soon be jockeying for market share once again, having previously heeded APRA's warnings about the pace of investor credit growth. 

Owner-occupier trends

With macroprudential measures having slowed the volume of investor transactions focus has shifted to the owner-occupier space, where the number of monthly commitments is now trending up steadily.


At the state level, most of the increase has been accounted for by New South Wales and Victoria, while monthly commitments are also now shaping up in South Australia following a lean six years.

Queensland is home to many of the worst performing property markets in the country, particularly in its resources regions, and as such despite a solid performing capital city market presents an uninspiring trend at the state level. 

The trend in the number of owner-occupier commitments is flat in Tasmania, and declining in Western Australia and the Northern Territory.


Despite this, according to the latest figures in the face of low interest rates households are taking on mortgages that on average are more than 13 per cent greater than one year ago. 


As a consequence the trend in the value of owner-occupier commitments in rising in the two most populous states, and in Queensland and South Australia, while nationally lending volumes have increased by more than 23 per cent over the year to November. 


I'll take a more detailed look at trends in the investor lending next week.

The wrap

Overall a strong result in November which easily eclipsed market expectations and which suggested that many commentator forecasts for a universally soft housing market in 2016 have been under-cooked. 

That said there will be some losers in this calendar year, even if this data suggests that the outlook is considerably brighter than many thought.