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

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Friday, 12 February 2016

7 year high for home loans

Housing finance solid

December proved to be a solid month for Housing Finance, with the number of owner-occupier commitments rising by a seasonally adjusted +2.6 per cent to 56,552, essentially in line with market expectations.

Owner-occupier commitments are now close to a 7 year high, and rising. 

The value of investor loans rebounded moderately by +0.6 per cent in December, while the value of owner-occupier commitments increased by +0.8 per cent, taking total housing finance to a historically very strong seasonally adjusted total of $33.5 billion. 

This was the second highest month for total dwelling finance in seasonally adjusted terms behind the $33.8 billion recorded in August, with the resources states acting to drag down the total (in fact, in raw original terms, December was the biggest ever month of lending, nudging $36 billion).

There are some notably blurred lines within the housing finance data at the present time. 

The trend figures below shows that there has been a high volume of refinancing, while the big picture is that as investor lending has slowed lenders have to date managed to reach a greater number of owner-occupiers with cheaper and more attractive loan terms. 

The green line, which represents the ex-refinancing figures, suggests that at the national level housing finance figures are consistent with a solid but somewhat softer outlook for 2016.

Refinancing is a complicating factor, certainly, but the value of loans actually advanced in December was up by +24.6 per cent to its highest ever level at $23.8 billion.

State versus state

The trend in the number of owner-occupier commitments increased in all states except for Western Australia. 

The trend value of owner-occupier commitments has nosedived in the Northern Territory over the past year plummeting by some 17 per cent, in line with an expected significant correction in Darwin's housing market.

The value of owner-occupier commitments in 2015 has ripped in New South Wales (+39 per cent) and Victoria (+31 per cent), although these states will be impacted materially by APRA's crackdown on investor lending. 

The trend value of owner-occupier commitments is also rising solidly in Queensland and South Australia, both for the quarter and for the year. 

The number of commitments to purchase new dwellings increased very strongly by +12.4 per cent in December, while the value of commitments to build new homes increased to a 12 month high of $2,87 billion. 

Finally, the number of first homebuyer commitments increased from 8,945 to 9,357 in December, which is above the average for the past 25 years. The spike in 2009 was caused by a temporary incentive in the form of first homeowners grants.

As a share of loans written, first homebuyers ticked up from 14.9 per cent to 15.0 per cent.

The wrap

The home lending market looks to be in pretty good nick with the number of homebuyer loans now close to their highest level in 7 years.

The funds actually advanced hit a record level in December, while lending for new construction and homes was very solid.

Summarily, the resources states of Western Australia and the Northern Territory look set for a year of softening housing market values.

On the other hand the other major capital cities look set for a solid year, with market activity shifting away from investors and towards homebuyers, although there was also a slight rebound in investment lending in the month. 

Investor activity is still elevated - as a share of new borrowing excluding refinancing investors accounted for 45 per cent of the total, down from nearly 52 per cent one year ago.