Australia’s great housing paradox continues.
House prices are rising, auction clearances are high and yet the number of owner-occupied housing commitments hit a nine year low in March.
At a time of record price movements (an annual 20.1% surge in the eight capital cities in the year to March, and a rise of 27.7% in Melbourne in the same time), the March figures showed a seventh consecutive monthly fall.
While demand for housing finance is falling, sales and prices of houses, especially in the wealthier suburbs of Sydney, Melbourne, Brisbane and other major cities, continues to rise.
Prices and demand in less costly suburbs is nowhere near this level, nor are prices rising as strongly for flats, home units and townhouses.
Clearly the interest rates late last year and in February and March are having an impact, but it’s not that dramatic an impact if you looked at the sales prices and auction clearances by themselves.
It could be offshore buyers paying cash (since stopped by the federal government, hopefully) or it could be wealthier buyers paying cash or using loans from private companies, rather than banks.
Figures yesterday on lending finance for March from the Australian Bureau of Statistics show that the seasonally adjusted estimate for the total number of owner occupied housing commitments fell 3.4% in March 2010.
"This is the lowest level since April 2001," The ABS said.
A total of 48,260 commitments for owner occupied were approved in March, 1,723 down on February and 6,633, or around 11% lower than in June 2009 when 64,893 were approved.
Excluding refinancing of existing mortgages, the fall was even greater.
The ABS said that in trend terms, the number of owner occupied housing commitments excluding refinancing fell 4.7% in March 2010 compared with February 2010, following a fall of 5.2% in February 2010.
The seasonally adjusted series fell 4.6% in March 2010 after a fall of 2.7% in February.
"The number of finance commitments for the construction of dwellings for owner occupation fell 7.3%, seasonally adjusted, in March 2010.
"Between February and March 2010, the number of owner occupied housing commitments (trend) decreased in: New South Wales (down 733, 5.1%), Queensland (down 446, 4.5%), Victoria (down 307, 2.3%), Western Australia (down 288, 4.5%), South Australia (down 217, 5.5%), Tasmania (down 53, 5.9%), Australian Capital Territory (down 20, 2.0%) and Northern Territory (down 13, 3.3%).
"The seasonally adjusted estimates decreased in all states and territories.
"In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments decreased from 18.1% in February 2010 to 16.1% in March 2010," the ABS commented.
The ABS said in seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions fell by 1.4% in March 2010, but the value of investment housing commitments seasonally adjusted rose 3.0% in March 2010 to 6,644.
"In trend terms, the number of commitments for the construction of dwellings decreased 4.6%, the number of commitments for the purchase of established dwellings fell 4.0% and the number of commitments for the purchase of new dwellings fell 3.2%."
The Reserve Bank is puzzled: in its latest quarterly Statement of Monetary Policy, released last Friday, it noted "the divergence between aggregate nationwide loan approvals and housing prices remains something of a puzzle, although the developments in housing finance across the states appear to be broadly consistent with developments in prices”.
The RBA speculated that second and third home owners were cashing in and buying without the need for loans, while activity in the first home buyers market (with prices around $600,000-$700,000) where loans are a must has fallen, as the ABS noted yesterday.
Whatever it means, its bad news for the banks.
They also have to contend with a class action on fees.
