Home loans dropped for a second consecutive month in February, as the housing industry struggles in the aftermath of the summer flooding and weaker overall demand.
But for this month, don’t blame the Queensland floods exclusively, as NSW saw a big drop (perhaps ahead of the state election in late March?) and the share of first-home buyers again fell.
In fact the state saw its biggest monthly fall in 14 years. In seasonally adjusted terms, home loans in New South Wales fell 10.%, its biggest monthly decline since February 1997, the Australian Bureau of Statistics said.
Nationally, the number of home loans fell 5.6% in February, following a revised 6.3% fall in January (a 4.5% fall originally reported), according to the ABS figures. The fall was considerably more than the 2% fall tipped by the market.
The ABS said the number of loans for the purchase of existing homes dropped 6% in the month to 39,076, while the number of loans for newly built homes dived 12% to 1745.
Victoria saw a fall of 4.6% in new loans in the month, while in Queensland they were down by only 0.5% from January.
In Western Australia the number of home loans fell 2.1%, while in South Australia home loans were down 5%.
Tasmania experienced a 13.7% plunge while in the Northern Territory they were down 11.4% and in Canberra they fell 4.5% (both are very small markets and not a great indicator nationally).
The ABS said there was a seasonally adjusted fall of 12% in February in the number of loans to buy new houses, following falls of more than 10% in each of the two previous months.
In original terms, the share of first-home buyers as a percentage of the total dropped to 14.9% in February, the lowest share since June 2004.
That’s down from 15.2% in January and 28.5% in May 2009 which was the peak of the first home buyers’ scheme.
The total value of new home commitments and loans for renovations fell 4%, seasonally adjusted, while the ABS said the seasonally adjusted value of owner occupied commitments fell 4.8%.
The value of investor housing loans was down 2.3%.
Separately, the March quarter National Australia Bank residential property survey showed that the industry tipped house prices to grow only 0.6% over the next 12 months.
The bank said in its latest quarterly residential property survey that "House price expectations were revised up slightly in the March quarter survey, but gains are expected to remain modest.
"Nationwide prices are tipped to increase by just 0.6% over the next year led by WA (1.1%), NSW/ACT (0.9%). Victoria & Tasmania (0.5%) and Queensland (0.1%).
"House prices in SA/NT are tipped to fall by 0.1%.
"Looking further ahead, house prices are expected to rise by 2.6% over the next two years. WA is still the best performing state (3.8%) and Victoria & Tasmania the worst (1.6%)."
If that happens then house prices will actually fall in real terms after inflation which is expected to be 3% by the end of this year, if the recent hike in food and petrol costs carries through into the second quarter.
The NAB said that the outlook for rents had also gotten better.
"Nationwide rents are forecast to rise 3.5% in the next year and 5.2% by March 2013. The biggest gains in this period are forecast for WA and NSW/ACT. Rental expectations are weakest for SA/NT and Queensland," the bank forecast.
"Stronger price and rental expectations have boosted NAB’s Residential Property Index.
"The Index is now expected to rise to 45 points over the next year (27 points in December).
"Improvements are forecast in all states, led by WA and Victoria & Tasmania. Queensland is expected to remain the weakest state, but conditions are expected to be much better than in our previous survey. The Index is expected to rise to 74 points by March 2013, with improvements forecast in all states."
The bank said that Australian investors have become much more important in driving new residential developments.
"Resident investors are now expected to account for 33% of the market in the next 12 months (24% in December). This may reflect changes to superannuation rules making it easier to hold property within self-managed super funds
"The strongest demand for new residential property remains in inner city housing, low rise and townhouses, where demand is classified as “good”.
"Demand conditions for CBD apartments, middle/outer ring low rise, townhouses and apartments is assessed as “fair”.
"Tight credit conditions are still seen as the main impediment to new residential developments, but housing affordability and rising interest rates are also identified as “significant” constraints.
"In the existing property market, resident owner occupiers will continue to dominate demand over the next year, accounting for around 57% of sales. The share of Australian resident investors is expected to be much lower at just 20%.
"The best prospects for capital growth in existing property markets over the next year are in the sub-$500,000 category. The outlook for higher priced property is much weaker.
"Access to credit has replaced rising interest rates as the biggest impediment for purchasing existing property. Employment security and housing affordability are also seen as “significant” impediments," the bank added.
