Property demand eases
Neat real-time analysis from REA Insights shows hot property demand has rolled over, with the volume of highly-engaged buyers just beginning to turn downwards now.
Weekly 'for sale' searches are still running at high levels, especially in New South Wales, Queensland, and Victoria.
Total listings are also rising now as more sellers come to meet the market, though they remained 27 per cent below their 5-year average, according to CoreLogic's figures up to the first week of March.
Source: CoreLogic
The HomeBuilder effect will taper off now, and so too in due course will the ultimately exhausted demand from first homebuyers.
A surge of first homebuyers and record low rates has certainly turned the market around, but prices aren't rising everywhere or for all property types, and there's also been a temporary shift away from high-density developments and CBD markets, which have struggled.
Aggrieved analysts have tried to 'prove' a deterioration in lending standards by quoting quarterly percentage changes in interest-only lending, but that's a gross torturing of seasonal quarterly statistics as the stock of IO loans as a share of lending continues to drop to low as we've ever seen.
IO loans outstanding aren't even half of what they were a few years ago, and fell to just 14 per cent of residential term loan books, down from 39 per cent in 2016.
Or alternatively there's been some highlighting of the miniscule increase higher LVR loans, which has naturally been driven by the temporary first homebuyer stimulus.
Nothing much to see here, beyond straw-clutching stuff.
Lending tough enough
All indicators and first-hand experience show that lending standards are not only robust, they're considerably tougher than they used to be.
Try refinancing a SMSF housing loan to anything much below a 6 per cent interest rate, for example, or getting a low doc loan...or getting a loan for pretty much anything other than a plain vanilla loan.
And lifetime borrowing capacity has been crushed for many borrowers over recent years, no matter how many contorted attempts media commentators try to push 'reckless lending' angles.
Making it even harder to borrower is arguably harmful for financial stability, and will only serve to inevitably lead to the next housing shortage, especially as non-resident investors aren't funding new developments any more.
Let lenders lend and borrowers borrow, and the housing supply will respond naturally.
Low rates...that's it
It's basically only low nominal interest rates which have driven and facilitated the housing upswing.
Well, that, and the lack of ability to travel or take foreign holidays, or spend stimmy cheques on cars that won't be rendered obsolete within a decade due to the relentless advance of EVs.
The latest Reserve Bank of Australia ratios showed that debt to income ratios have declined quite noticeably since June 2019, while interest serviceability has collapsed to levels we've haven't seen before in this century.
And there's plenty more firepower to come over the next 3 or 4 years, as fixed rate borrowers roll off their existing mortgages and see their household cashflows improve markedly.
Over to The Otterman:
Yes.
Yes.
Yes.
That's it. That's the Tweet.
