So what exactly is happening with Australia’s housing finance?

So what exactly is happening with Australia’s housing finance?

Last week’s official statistics – well, more importantly, the media hype & reporting that seems these days to accompany such data – leaves most of us shaking our heads.

“Best increase in four years.”  “May’s interest rate cut has immediate impact.”  “Largest ever volume in loans for one month.”  And The Band Played On…to quote a recent Joe Walsh tune.

Given that the ABS figures released last week are up to March & AFG’s Mortgage Index – for mine, one of the more accurate measures of the Australian mortgage market – covers results up to April, a headline citing the impact of May’s interest rate drop seems a bit wild.  But these days even the financial press like to run such spruiks.

Now every quarter, & for just over 20 years, I analyse Australia’s housing finance figures.

Yes, I am that boring.

I have a couple of excel spread sheets; I like to look at the trends on a moving annual basis, rather than month to month as this eliminates seasonal influence, like when school holidays occur & especially for the results earlier in the year, when Easter actually falls.

I do this as it helps to confirm – when analysed properly – the direction in which the residential market is heading.


Here is my summary of what’s been going on:

  • Excluding refinancing, there was $206 billion lent to purchase residential property across Australia over the last 12 months.  This is up $14 billion or 7% on the preceding year ending March 2011.
  • Australia-wide, first home buyers took out 10% of the housing loans (by dollar volume) last year.  They had a 14% market share the year before.  Investors got 44% of home loans & second/subsequent owner-residents 47%.
  • Breaking the loan data down further – 8% of the $206 billion lent for housing went to owner-residents looking to construct a new dwelling; 5% went to owner-residents looking to buy a newly built residence & 43% went owner-residents buying established homes.  These three owner-resident segments increased by 6%; 22% & 3% respectively to be, combined, $5.8 billion higher than the year before.
  • A similar analysis of investment lending – loans to investors for new construction attracts just 3% of Australia’s home lending; 5% went to investors looking to buy in a company, trust or super fund & 36% went to individual investors looking, for the most part, to buy a resale property.  These three segments increased by 3%; 28% & 9% respectively, combining to an $8.1 billion increase over the last 12 months.
  • The amount of money lent to refinance existing loans fell by 2% or 1.1 billion across Australia over the last 12 months.
  • The loan to value ratios for new loans, according to AFG, averages 69% across the country.  There has been very little change in this ratio over recent years.
  • Today, one in three new loans are fixed, close to double the proportion just nine months ago.  Little surprise here, given the falls in interest rates.
  • The numbers of new home loans are up 31% in Western Australia & 29% in New South Wales.  They are also up 25% in Victoria & 7% more in South Australia.  They are flat in Queensland.
  • The average home loan in Australia is now $400,000, ranging from $479,000 in New South Wales to $320,000 in South Australia.  Queensland’s home loans average $341,000.
  • The proportion of first home buyers in the New South Wales & Queensland markets is very low, at 4% & 5% respectively.  They were 13% & 16% just a year ago.  First home buyer activity has increased in Victoria (18% market share) as well as in South Australia (14%) and even in Western Australia (23%, up from 20% the year before).
  • In terms of actual numbers, there were 92,700 first home buyers (who took out a loan) across Australia for the year ending March 2013; this is down 4% on the year before.
  • Based on annualised results – the number of first home buyers in New South Wales is down 39% or by 12,000 on the year before.  Queensland numbers are down 750 or 4% on the previous year, but down 21,000 (yes 21,000 buyers) from the 2010 market peak.  They are up 30% in Western Australia (4,200 more this year versus last); up 15% in South Australia (up 760) & up 13% in Victoria (up 3,200).
  • One in two buyers in New South Wales are now investors.  There has been little change in the proportion of investment activity in the other states.  There are slightly less investors in Western Australia than the year before.

Phew! And if you read all of that, I am more than impressed! 


Some observations

Very little really happens on a monthly basis when it comes to home loan statistics.  The month to month results are all swings & roundabouts.  The annualised trends paint a truer picture.

The monthly results might mean something to the banking industry or mortgage-related businesses but to be honest, they don’t really mean much to property buyers.  They provide little in the way of knowledge.

Annualised results do, however, help to confirm the direction of the residential market.

To this end, the current results – along with other evidence – show that Australia’s housing market is improving.


Sadly, Queensland’s recovery has stalled. 

New full-time job creation is the key to a return to Queensland’s projected trajectory.  I think it is postponed not cancelled.  When it comes, it might even travel faster to make up for lost time.

Australia-wide, property-wise, April was also slower than expected.  Easter & school holidays had an impact, as is the malaise in Canberra.

But the annualised housing finance results are showing to me, that maybe April was an “air-pocket” rather than something more severe.

Now, I do expect more turbulence as we approach 14th September, but the housing finance results suggest that the plane is in good working order; the pilot (i.e. Glenn Stevens) is sober, & there is enough fuel (hopefully) to get us back on the ground.

An early federal election would help ensure a safe & comfortable landing.

PS The figures also show that something is broken in Queensland & New South Wales when it comes to first home buyers.  Newman & Co. need to implement whatever has been done in Western Australia, South Australia & Victoria, as things for first home buyers seem to be working there.  The recent changes in New South Wales & Queensland (i.e. removing the first home assistance from second-hand property & refocusing it solely on new property) are working wonders.  Not!

Also, lending for new construction or newly developed dwellings have very little market shares – they are half of what they were a decade or so ago.

This is another thing that needs fixing.  Our tax system is largely to blame.


This Matusik Missive, like all of them, is commentary & not advice.  Readers should seek their own professional advice on the subject being discussed.
Michael is the director of independent property advisory Matusik Property Insights and writes the  Matusik Missive which is free, however, reprinting, republication or distribution of any portion of this material, or inclusion on any website, is strictly prohibited without the written permission of Matusik Property Insights and may incur a charge.



Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.


Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.

Michael Matusik


Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive

'So what exactly is happening with Australia’s housing finance?' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.


Copyright © Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts