Despite three interest rate rises in 2006 plus some major tax changes, investors have returned to the housing market in a big way, according to figures from the Australian Bureau of Statistics.
A surge in investment interest helped total housing financeby value rise 3.3 per cent in February, seasonally adjusted, to $20.852 billion, according to figures released yesterday by the ABS.
“Owner occupied housing commitments increased 0.9%, while investment housing commitments rose 8.9%, “The ABS reported.
“The number of commitments for owner occupied housing finance increased by 0.3%, while the number excluding refinancing increased by 1.5%.”
“The number of first home buyer commitments as a percentage of total owner occupied housing finance commitments decreased from 17.7% in January 2007 to 17.5% in February 2007 and the number of fixed rate loan commitments as a percentage of total owner occupied housing finance commitments decreased from 20.5% in January 2007 to 20.4% in February 2007.”
The figures confirm earlier indications of renewed interest by investors in houses and flats after the rush to restructure personal investments for many investors ahead of June 30 and the new rules on superannuation, had seen a drop off in interest and a spate of house and unit sales.
Publicity about high rentals, especially in the Sydney metro region has also worked to bring investors back into the market.
The number of owner-occupier commitments rose 0.3 per cent to a total of 62,369 in February.
Economists had expected housing finance commitments for owner occupiers to be steady.
The release yesterday contained upward revisions to previous releases with loans having grown 0.5 per cent in both December and January, up from the 0.3 per cent previously reported for both months.
NSW clocked up a further 1.0 per cent increase in loans in February, on top ofthe 2.6 per cent rise in the previous month.
The biggest increases in February were in the ACT, up 4.9 per cent (it is a small base), South Australia by 3.2 per cent and Victoria by 2.1 per cent. Queensland rose by 1.7 per cent.
But the Northern Territory saw a sharp drop of 7.6 per cent (it’s also a small market), Tasmania was down 2.0 per cent and Western Australia fell 1.1 per cent as the pace of last year’s boom continues to ease.
It’s clear the three interest rate rises of last year have had little impact on a housing market that was already soft from the sharp fall from 2003 onwards.
If the RBA is to lift rates again this year it won’t be on the basis of what we are currently seeing in housing.
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Last week the ABS building approvals figures for February showed some evidence of rising investor interest.
While the seasonally adjusted estimate for total dwelling units approved rose 10.6% to 13,418, in February 2007 and the seasonally adjusted estimate for private sector houses approved fell 0.3% to 8,324 in February 2007, the ABS said that “the seasonally adjusted estimate for private sector other dwellings approved rose 31.5%, to 4,552, in February 2007”.
That was interpreted as a rise in interest from investors. Some commentators however said it could also be a result of a rise in approvals after the usual Christmas-New Year slowdown in local governments and/or the approval of a couple of large home unit developments.
The ABS said last week that the seasonally adjusted estimate for the value of total building approved fell 4.8% to $5,642.3m in February 2007.
“The value of new residential building approved rose 5.7%, to $2,909.6m. The value of alterations and additions rose 1.8%, to $463.3m. The value of non-residential building fell 16.6%, to $2,269.5m following a revised increase of 19.6% in January 2007.”
The housing finance figures indicate that investor interest may not have spilled over into the actual building industry yet in a major way: that is a bit unclear. But from the two sets of figures some evidence of an upturn in investor interest is clear, despite the doomsayers.
