The ABS recently released the June Housing Finance Approval numbers and these were lower than many people expected.
Remember…home owners and property investors take out loans a few months before the purchase real esate, so finance numbers are a leading indicator of what’s in store.
In response to the latest figures Louis Christopher the Managing Director of SQM Research said
“Housing finance approvals weren’t just weak. They were very weak and suggest there was a lag reaction to the May interest rate rise.
Housing finance approvals are a great measurement of the state of the health of buyer demand for property. Let’s face it, most of us require a loan of some sort when acquiring a home or investment property. And this series, which is produced by the Australian Bureau of Statistics (ABS), captures housing loan applications that were approved for the month. Generally speaking, most loans get drawn upon once they are approved, so this is why this series is a great measure of demand for housing.
“Loan approvals are now at the levels recorded in 2008.
And what happened to housing prices in 2008? They fell. The ABS suggests the fall was a five percent decline for that year. Sure, there were many reasons for the falls which are not in effect this time around.
For example, there was evidence of forced/panic selling activity in 2008, particularly at the top end of the market. So far we don’t see any significance evidence of that type of behaviour from vendors. Clearly this time around, there is (currently) more confidence of our economic outlook. One may recall, especially in the latter half of 2008, that there were jokes going around on whether the ATMs would be soon closed!
So a different environment yes, but still, the number of buyers have dropped away to the point where, if it were to say at current levels vendors will, sooner or later, drop their asking price to meet the market.
So for the record our forecast for 2010, made at the start of this year, was for national house prices to rise between 7-9%. That’s already happened in the first two quarter of this year. So for our forecast to stand, we need to see house prices remain as they are for the rest of the year.
And we think that is now very likely to happen with some downside risk.”
There is no doubt that our property markets are going to slow down over the next few months and differnet sectors of the market will be affected differently. While this may be bad news for home sellers, it will create great opportunities for property investors with a long term perspective. Watch this space….
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