Friday, 9 September 2011

An uplift in buyer activity may be just around the corner by Tim Lawless

An uplift in buyer activity may be just around the corner  by Tim Lawless
source: RPDATA


The housing finance data released by the Australian Bureau of Statistics each month generally provides a reasonable insight into how demand is tracking across the Australian housing market.  To put it simply, most people buying a home need to obtain finance.
The trend in housing finance commitments, which is collected by APRA and covers at least 95% of all housing finance commitments across Australia, has been reasonably flat over the first seven months of 2011 after trending down from a recent peak back in September 2009 (the month prior to interest rates commencing their tightening cycle).



The seasonally adjusted value of both owner occupier and investor loans in July 2011 (excluding refinances) was down by about 20% from the September 2009 peak.
Looking at the value of housing commitments by buyer type and purpose highlights some of the trends across the Australian housing market. Broadly, the owner occupier market has remained more active than investors, with the value of owner occupier loans commitments (ex re-fi) down by 1.6% over the 12 months to July and investor loans are down 9.0%.
The recent trends across the various segments of owner occupier lending are all quite similar.  Apart from a substantial increase in home loans being refinanced (the value of housing loans being refinanced was close to 30% higher in July 2011 compared with July 2010), the value of loans for new home construction, the purchase of a new home and the purchase of an established home have all remained reasonably flat over the year to date.




The month to month movements in housing finance has seen loan values improve from the recent lows however.  Owner occupier loans are up 5.9% between March and July of this year, while investor loans are up 3.1% between the April low and July this year.
Investors now equate to 38.2% of the value of all housing finance commitments excluding loans being refinanced.



Investor loans have shown a greater level of decline compared with owner occupiers, which is typically the case when market conditions move out of the growth phase; investor numbers tend to taper as capital growth leaves the market.  Higher yields, more stock to choose from and improved buying power hasn’t been enough attract a large number of investors back into the market.



With interest rates looking stable and economic growth showing some improvement we may gradually see some improvement in housing finance numbers which ultimately points to an improvement in transaction volumes which were tracking about 17% below the five year average nationally in June.  We are likely to see more new listings enter the market as we move into Spring, so an uptick in buyer activity would be a very welcome event for anyone looking to sell their home.