Housing has traditionally been the source of much of Australia’s booms and busts but for the past three years it’s been side-lined by the resources boom.
Analysts and the monetary authorities still watch it closely because in recent years its helped finance consumption as people refinanced existing homes at lower rates before 2004 or traded up to cash in the huge rises in their equity.
Either way the housing market has been a sensitive indicator for the economy and even now, with the number of rental properties falling and rents exploding, it remains a good barometer.
But it isn’t booming and isn’t creating the inflationary pressures we’ve come to expect.
No, New Zealand has a good, old fashioned housing boom which is proving hard to cool while in the US we are seeing the spreading impact of their housing boom and bust.
US Developers and suppliers were hit late last year now it’s the turn of those companies which financed the boom, especially to the less credit worthy buyers.
So normally an increase in housing finance approvals would have some significance here but the December increase, released on Friday, tells us more about what is not happening.
The seasonally adjusted figures were a touch higher, the trend figures should no easing in the slide in the level of activity that’s been going on since mid year (when there was a tax law change induced rise in investment property loans prior to June 30.
The interest rate rises in May and August are doing their bit, the November rate rise is kicking in.
The number of loans to owner-occupiers to build or buy homes or units or flats rose just 0.1 per cent to 61,597 from November, according to the Australian Bureau of Statistics. November’s figures were revised downwards to a fall of 0.4 per cent.
That is not going to frighten the Reserve Bank or cause Governor Glenn Stevens to make last minute changes in the first Monetary Policy Statement of the year.
What is worrying the Bank though is the continuing strength in the labor market: more than 300,000 jobs were created last year, that’s the largest number since 1989 (Prior to the start of the recession we had to have).
That saw the unemployment rate fall to 4.5 per cent in January, the lowest since May 1976.
The value of lending to owner-occupiers rose 1.1 per cent to $13.9 billion in December while the value of lending to investors rose four per cent to $5.7 billion, the biggest in six months.
Inflation is running at 3.3 per cent in the December quarter on a headline basis (but under three per cent on the RBA’s own measures) so there’s still some pressure from last year’s explosion in energy costs and other price rises caused by capacity and labour shortages in the boom states of Western Australia and Queensland.
Sluggish NSW had an unemployment rate of five per cent last month and the news from the housing finance figures wasn’t pointing to a recovery soon in the industry in the state.
The two problems in housing in NSW are the slowdown which shows little sign of ending, the shortage of rental accommodation which is seeing a boom in rents and the continuing spate of mortgage in possession sales in the west and south west of Sydney.
But the continuing strength in the jobs market is helping cloak the impact: although in the south west of Sydney unemployment is around nine per cent in some suburbs, double the national figure.
The trend figures tell the real story: housing as a way to go yet before bouncing: perhaps most of 2007. And while that continues the RBA will juggle the oddities of the labour market, rising oil prices (again) and keep the hands off the rate levers, if it can.
That should be the message from the Monetary Policy Statement later today.
