Housing recovery under way. But what are investors buying in to?

I speak with bias, but it is good to see the ABC still using independent analysts here

Let’s add more colour to this story…..

Yesterday the Australian Bureau of Statistics (ABS) released its monthly update on national housing finance approvals.

Over the years it has been a very reliable indicator as to the strength of buyer demand.  You can access the data by clicking on the following link –

http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0?OpenDocument

In short, buyer demand is now rising at a rather accelerated rate of growth, albeit from a very low base:


Source: SQM Research, ABS Catalogue no. 5609

The number of housing finance approvals excluding refinancing  has now broken through its five year moving average (grey line) and is now back up to the point where based on our analysis, dwelling prices should rise by at least nominal GDP (the red dot).
So far, the rise has been driven by existing owner occupiers (perhaps looking to upgrade) and property investors.


Source: SQM Research, ABS Catalogue no. 5609

This makes this recovery separate from the last cycles of 2009 and 2001 where first home buyers lead the charge.

Notably, in each of those years we had the introduction of the Federal and State First Home Owners Grant (2001) and then the First Home Owners Boost (2009). Unless something comes out tonight, there is no new Federal Government initiative this time round to entice first home buyers (FHBs).

I note in the media yesterday and some blogs, that the story was about ongoing shrinking FHBs.

Yes, as a percentage of ALL buyers, FHBs had a lower share this month. That is because in absolute terms, existing owner occupiers and investors rose substantially.

However, it would be wrong to suggest or state that First Home Buyers reduced in numbers. No, they actually increased in numbers and this was the second month running. The increase was 11.3% from February, bearing in mind that these numbers are not seasonally adjusted.

I find it also very interesting that purchases of new dwellings rose 21.1% (seasonally adjusted).

That’s a very large rise and finally fits with the HIA’s new home sales data that has been suggesting in recent months, more activity on new home sales, particularly in NSW where the grant for a FHB buying a new dwelling is at its greatest (up to $35,000 in total concessions).  This has been good policy for the N.S.W State Government, which looks like it is now starting to pay off.


Source: SQM Research, ABS Catalogue no. 5609

When looking at the state break up in TOTAL housing finance approvals, we note there were rises across the board but most notably strong rises occurred in NSW, Victoria, Queensland and WA.


Source: SQM Research, ABS Catalogue no. 5609

Conclusion

A housing recovery is clearly underway and it has so far been driven by investors and owner occupiers.

The recovery appears to be occurring in most states. I do wonder though, exactly what investors are buying into.

………..

This extract taken from SQM’s weekly newsletter published each Tuesday. 

[post_ender]



Want more of this type of information?


Louis Christopher

About

Louis is recognised as one of Australia’s most respected and impartial research property analyst. He has extensive knowledge and experience of property and is regularly quoted in the media on his insights and is director of SQM Research.
Visit www.SQMResearch.com.au


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