Australian housing market trends

The housing finance data released by the ABS for the December quarter highlights some interesting trends in the Australian housing market.

The ‘broad brush’ overview is that owner occupier loans are showing a small improvement due to increasing non-first home buyer activity, first home buyers are remaining on the sidelines and the value of investor finance has remained fairly flat.

It is very clear that the surge in first home buyers during 2009, due to low interest rates, improving affordability due to property value falls during 2008 and the First Home Owner’s Grant Boost pulled forward the majority of first home buyer demand for 2010 into 2009.

2010’s volume of first home buyers was 50% lower than it was during 2009. Between 1993 and 2010 there has been an average of 116,284 first home buyer finance commitments annually. Given this, 2010 recorded first home buyer activity which was -17% below the long-term average.

An interesting point to note is that over the last 10 years first home buyers have become much more active at times when the market has been recording superior levels of value growth. A good example of this was during 2001 when capital city home values increased by 18.7% for the year. At this time there were 145,000 finance commitments to first home buyers. 2009 was the busiest year for first home buyers, with more than 190,000 housing finance commitment. At the same time property values increased by 12.1% that year. In most instances over the past decade, when there has been periods of strong property value growth these have been accompanied by an above average volume of first home buyers.

In other news, the Reserve Bank released the minutes of its February monthly board meeting where it decided to keep official interest rates on hold.

Of specific interest to the housing market were the following comments. ‘The housing market remained steady; with nationwide measures of dwelling prices broadly flat since the June quarter 2010. Housing credit outstanding had continued to increase at around ½ per cent per month, which was a little below growth in household income. Loan approvals, including for new construction, had increased in recent months. Building approvals data showed a solid recovery for apartments, reflecting particular strength in Victoria.’