In this week’s Housing Market Update, ANZ remains cautiously optimistic on the outlook for the Australian economy.
This positivity is attributed to housing finance increases in September, which reflect solid growth in investor finance and a more moderate increase in owner occupier finance.
ANZ BOTTOM LINE
Housing finance increased in September, reflecting solid growth in investor finance and a more moderate increase in owner occupier finance.
While housing investors, particularly in NSW, have driven strong growth in housing finance and sales turnover for some time now, owner occupier finance has made a considerable contribution to housing construction and new house purchases, albeit on more moderate growth.
We think today’s data will add some fuel to the embers of the potential for macro prudential policy measures.
- Housing finance increased in September, with the value of finance commitments 2.7% higher in the month.
While housing finance increased in value terms, the number of owner occupier loans was lower in the month, reflecting softer auction clearance rates and home buyer sentiment.
Looking forward, solid population growth and low interest rates are likely to support moderate housing finance growth in the coming months.
- While ANZ remains cautiously optimistic on the outlook for the Australian economy, supported by low interest rates and improved business conditions, economic activity continues to be weighed down by an elevated household sector aversion to borrowing.
In addition, uncertainty about the near-term outlook for employment (partly reflecting statistical ‘noise’ in the official ABS labour force series) has maintained job security concerns.
While we maintain a positive outlook for the housing market, these factors are likely to weigh on sentiment and housing finance for some time yet.
- That said, strong population gains, a strong investor appetite for housing and pent-up home buyer demand will go some way to offsetting the negative impact of tentative market sentiment.
Moreover, solid growth in finance for residential construction and elevated building approvals (particularly for inner-city high-rise apartments) is likely to support building activity in the remaining months of 2014.
Strong auction levels testing home buyer demand
The depth of home buyer demand was tested in Sydney and Melbourne’s auction markets in particular. Auction clearance rates eased with the depth of home buyer demand tested on almost 2,900 auctions in the past week.
Home prices were tentative in the past week, with prices increasing in Sydney and Brisbane while prices remained unchanged or drifted lower in the other major capital cities.
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