Housing finance; NAB Business survey
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Owner-occupier housing loans rose in October.
Home loans lift: The number of new owner-occupier housing loans rose by 1.0 per cent in October, the ninth increase in the past 10 months. The value of all home loans rose by 4.1 per cent to record highs.
- First home buyers accounted for just 12.6 per cent of all loans, up from the record low of 12.5 per cent in September.
- Record commitments: The value of previous home loan commitments that haven’t been advanced or utilised stood at a record $25.2 billion in October, up 13.6 per cent over the year.
- Business conditions at 15-month high: The NAB business confidence index eased from +6.1 to +5.3 in November. The business conditions index improved from minus 3.6 points to a 15-month high of minus 2.7 points. The survey was conducted from November 25 to 29.
What does it all mean?
- Investors remain keen about putting their money to work in the housing market. Certainly there are plenty of grounds for optimism with rising population, low interest rates, government grants for new construction and tight housing markets.
- The good news is that investors aren’t just buying established dwellings and driving up home prices, but money is being ploughed into new house and apartment developments and adding to housing supply and economic activity more generally. It is clear that home construction will play a key role in driving the broader economy in 2014, taking over from the mining sector. And arguably more industries and regions will feel the benefit of increased home building rather than mining construction.
- Some believe that first home buyers are being pushed out of the housing market. Rather many young Australians are banking on investors funding new housing developments, given that preferences have shifted to renting rather than buying in recent years. Home supply is rising and that will keep growth in rents under control.
- The healing process is underway, but Aussie businesses are still wary about the future. Both business conditions and business conditions barely budged in November although there were encouraging signs in terms of general trading conditions and profitability. No doubt many businesses want to see sustained improvements in consumer spending and foreign demand before getting too excited about the future.
What do the figures show?
Housing Finance:
- The number of new owner-occupier housing loans rose by 1.0 per cent in October, the ninth increase in the past 10 months. Housing finance commitments are up 13.3 per cent on a year ago.
- Excluding the refinancing of dwellings, loans were up by 2.0 per cent in October.
- The number of loans for the construction of homes rose by 1.0 per cent in October – the 10th rise in 11 months. The value of construction loans rose by 0.5 per cent in October.
- The number of loans to buy newly-erected dwellings rose by 3.6 per cent and the value of loans rose by 0.3 per cent.
- The number of loans for the purchase of established dwellings excluding refinancing rose by 6.6 per cent and the value of loans rose by 2.4 per cent.
- The number of refinancing transactions fell by 1.0 per cent from record highs while the value of transactions rose by 1.0 per cent.
- The value of new housing commitments (owner occupier and investment) rose by 4.1 per cent in October after a 6.3 per cent increase in September. Owner-occupier loans rose by 1.7 per cent while investment loans rose by 8.2 per cent.
- The value of home loan commitments made, but not advanced, stood at a record $25.2 billion in October.
- The proportion of first home buyers in the market rose from a record low of 12.5 per cent in September to 12.6 per cent in October but remains well below the long-term average of 20.0 per cent. Fixed rate loans were steady at 16.6 per cent of all loans in October. And the average home loan across Australia stood at $311,100 in October, up 4.0 per cent on a year ago.
National Australia Bank Business Survey:
- The NAB business confidence index eased from +6.1 to +5.3 in November. The business conditions index improved from minus 3.6 points to a 15-month high of minus 2.7 points.
- The index of trading conditions improved from minus 1.7 points to a 15-month high of +2.1 points; employment weakened from minus 3.4 points to minus 8.2 points; profitabilityimproved from minus 5.8 points to a 10-month high of minus 3.2 points; and forward orders weakened from minus 1.7 points to minus 1.8 points.
- Inflationary pressures increased in November with labour and purchase costs rising at a faster pace than prices. The monthly reading of labour costs rose at a 0.6 per cent quarterly rate in November after a 0.6 per cent rise in October. And purchase costs rose at a 0.7 per cent quarterly rate in November, down from 0.8 per cent in October. Prices rose by 0.2 per cent after a 0.3 per cent rise in October. Retail prices rose at a 0.4 per cent quarterly rate in November, unchanged from October.
- Capacity utilisation lifted from a nine-month low of 79.3 per cent in October to 79.7 per cent in November, but below the long-term average of 81.2 per cent.
- The proportion of firms reporting that they did not require credit fell from around 66 per cent in October to around 48 per cent in November.
- Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
- The monthly National Australia Bank business survey is valuable in providing a timely reading on the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
- Investors and owner occupiers are actively taking out new loans, and encouragingly the construction sector is a source of interest. The good news is that new home construction has significant multiplier effects across the economy, meaning that the Reserve Bank can stay on the interest rate sidelines.
- The latest business survey has few implications for either interest rates or investors. Confidence is OK but business conditions are still soft. However the lift in labour and purchase costs deserves watching.
- There is a mountain of undrawn home loans, ensuring that new and existing housing markets will remain healthy for some time.
What is the importance of the economic data?
- Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
- The monthly National Australia Bank business survey is valuable in providing a timely reading on the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
What are the implications for interest rates and investors?
- Investors and owner occupiers are actively taking out new loans, and encouragingly the construction sector is a source of interest. The good news is that new home construction has significant multiplier effects across the economy, meaning that the Reserve Bank can stay on the interest rate sidelines.
- The latest business survey has few implications for either interest rates or investors. Confidence is OK but business conditions are still soft. However the lift in labour and purchase costs deserves watching.
- There is a mountain of undrawn home loans, ensuring that new and existing housing markets will remain healthy for some time.
