Petrol to get cheaper; Home loans consolidate

Housing finance; Weekly petrol prices

• Retail petrol: According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 2.8 cents per litre 117.7 cents per litre in the week to July 10 – a two month low.
• Last week in Australian dollar terms the Singapore gasoline price fell by $7.23 a barrel (9.6 per cent – the biggest weekly fall in five months) to $67.84 a barrel.
  ¾ Home loans: The number of loans (commitments) for budding home owners (owner-occupiers) fell by 1 per cent in May. Excluding the refinancing of dwellings, the number of loans was down by 1.1 per cent.
• The value of loans by owner-occupiers and investors to build new homes rose by 1 per cent in May. Owner-occupier loans fell by 0.6 per cent while investment loans rose by 3.9 per cent.
• The average home loan across Australia stood at $357,300 in May, down 7.5 per cent in the past seven months.

What does it all mean?

• There is good news for motorists. The fall in petrol prices last week was more a function of the discounting cycle across capital cities. However the even better news is that the Asian oil markets also recorded sharp falls, which will filter through to further price falls in the next fortnight.
• The key Singapore gasoline price fell by over US$7 a barrel or almost 10 per cent – marking the biggest weekly fall in five months. A result that should ensure cheaper fuel over the medium term.
• Motorists would be well rewarded for filling up in the next couple of days given the discounting cycle is near the low point across capital cities on the Eastern Seaboard. In Sydney, Melbourne and Brisbane prices have been falling for more than a month are holding $1.07-$1.11 a litre. While in Adelaide prices surged a week ago and are holding closer $1.25 a litre
• The home loan market has been softer in recent months despite super-low interest rates. In trend terms most lending categories have been going backwards, especially loans being taken out for those buying newly-erected dwellings or loans taken out for those building new homes. The cooling in the property market is a welcome sign given the ramp up in property last couple of years.
• Interestingly the strength in investment loans in May was a surprise. Although it does resonate with the lift in house price in recent months. Overall it is an encouraging result suggesting that a soft landing is underway.
• In addition, the average loan size fell in May reversed most of the gains in the prior month. The average loan size has now fallen by 7.5 per cent over the past seven months. It should be noted that the average home loan is influenced by home prices, composition of borrowers and the geographic location of home purchases

What do the figures show?

Housing finance – number

• The number of loans (commitments) for budding home owners (owner-occupiers) fell by 1 per cent in May after rising by 1.4 per cent in April. Excluding the refinancing of dwellings, the number of loans was down by 1.1 per cent.
• The number of new home loans was up by 11.4 per cent on a year ago.
  Loans by owner-occupiers for the construction of homes fell by 2.7 per cent in May.
• Loans to buy newly-erected dwellings rose by 0.5 per cent.
• Loans for the purchase of established dwellings (excluding refinancing) fell by 0.9 per cent.
• The number of refinancing transactions fell by 0.8 per cent.

Housing finance – value

• The value of new housing commitments (owner occupier and investment) rose by 1 per cent in May after falling by 1.7 per cent in April. Owner-occupier loans fell by 0.6 per cent while investment loans rose by 3.9 per cent.
• The value of loans by owner-occupiers and investors to build new homes rose by 4 per cent in May after falling by 14.8 per cent in April. The value of loans to build new homes eased further from the record highs of $3.41 billion in March to $3.02 billion in May.

Housing finance – other statistics

• The proportion of first-time buyers in the home loan market fell from 14.4 per cent in April to 13.9 per cent in June – a 12-year low. (However the figures take into account refinancing loans and as such the figures may misrepresent the true situation). The proportion of fixed rate loans fell from 16.2 per cent to 14.6 per cent in June. And the average home loan across Australia stood at $357,300 in May, up 2.9 per cent on a year ago.

Petrol prices

• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 2.8 cents per litre 117.7 cents per litre in the week to July 10. The metropolitan petrol price fell by 3.5 cents to 115.3 cents per litre while the regional price fell by 1.3 cents to 122.6 cents per litre.
• The national average Australian price of diesel petrol fell by 0.3 cents to 122.1 cents per litre in the week to July 10. The metropolitan price fell by 0.3 cents to 121.4 c/l, while the regional average price fell by 0.2 cents to 122.7 c/l.
• Average unleaded petrol prices across states and territories over the past week were: Sydney (down 8.7 cents to 110.9 c/l), Melbourne (down 5.0 cents to 111.4 c/l), Brisbane (down 4.8 cents to 114.2 c/l), Adelaide (up 13.6 cents to 126.4 c/l), Perth (down 0.8 cents to 122.4 c/l), Darwin (up 0.5 cents to 121.0 c/l), Canberra (down 0.2 cents to 128.8 c/l) and Hobart (down 0.2 cents to 125.0 c/l).
• Today the national average wholesale (terminal gate) unleaded petrol price stands at 106.2 cents a litre, down 1.9 cent a litre over the week and at 7-week lows. The terminal gate diesel price stands today at 108.5 cents a litre, unchanged on a week ago.
• Last week the key Singapore gasoline price fell by US$5.20 or 9.3 per cent to US$50.80 barrel. And in Australian dollar terms the Singapore gasoline price fell by US$7.23 a barrel (9.6 per cent – the biggest weekly fall in five months) to $67.84 a barrel or 42.7 cents a litre.
• MotorMouth records the following retail prices for capital cities today: Sydney 107.2c; Melbourne 109.7c; Brisbane 111.5c; Adelaide 125.9c; Perth 119.3c; Canberra 121.4c; Darwin 120.5c; Hobart 124.8c.

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.
• Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory’s metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.

What are the implications for interest rates and investors?

• Petrol prices look set to drift lower over the medium term although capital city motorists must still contend with the vagaries of the discounting cycle.
• The housing sector will continue to be a key driver of growth, given the amount of home building on the horizon. Home prices are lifting, but investors need to be more cautious about the outlook. Arguably we are near the point of maximum velocity. The plethora of cranes dotting skylines across the country indicate that plenty of sparkling new apartments will be coming onto the market over the next few years
• The Reserve Bank will be hoping that the more settled conditions in housing activity translates through to a slowdown in property price growth – particularly on the Eastern Seaboard.
• CommSec expects a further interest rate cut in August.