Tim Lawless comments on lastest ABS housing finance commitments data out today
Written on the 10th of February 2009 by Tim Lawless - RP Data
The latest housing finance data from the ABS shows the number of loans being committed for housing is now trending up after diving during most of the 2008 calendar year. On a seasonally adjusted basis, housing finance commitments were up 7.1% in value for owner occupiers.
The largest jump in home loan volumes has been for the purchase of new dwellings, where on a seasonally adjusted basis the number of housing loans for newly constructed dwellings has risen 15.2% over the month. The sudden rise can be partly attributed to the first home buyers incentive which has tripled the grant for first home buyers to purchase a newly constructed dwelling.
The latest data also provides evidence that the increase in the first home buyers grant is having an effect on this market segment. First home buyers comprised 25.4% of all owner occupier housing finance commitments during December. Two years ago first home buyers accounted for just 17.3% of all owner occupied housing finance commitments. The trend in the data is clear; the proportion of first home buyers in the market hasn’t been this high since December 2001.
Large jumps in first home buyer activity were recorded across all the states and territories, with the number first home buyer loans up 23.5% over the last year.
The latest data indicates the combined effect of the government’s stimulatory actions combined with improving housing affordability due to falling interest rates and some modest falls in prices have had a positive impact on property markets around the nation. The latest RP Data-Rismark house value indices show nationally property values have fallen by just 2.6% over the 2008 calendar year.
With interest rates likely to fall further and housing values remaining flat at best, the Australian market should experience further improvements to affordability which is likely to drive a recovery in the lower priced segments of the market. Although investor activity remains low (the value of investors housing finance commitments increased by 2.9% on a seasonally adjusted basis in December), most investors are likely to be targeting the same stock as first home buyers due to the low risk profile and the fact that these properties generally provide higher than average rental yields. The increased competition in this segment is likely to start placing upwards pressure on housing prices under $400,000 during 2009.
With price pressure potentially on the horizon in the lower priced segments of the market and the fact that the increase in the first home buyers grant expires at the end of the financial year, first home buyers may be feeling some urgency to buy into the housing market. Market conditions remain in favour of the buyer; however as competition heats up buyers will start to lose some of the advantages the soft market conditions have provided.