Investors continue to drive activity in the Australian housing sector higher, according to the finance approvals data for February released yesterday by the Australian Bureau of Statistics.
The number of home loans approved in February rose 2.3%, which was better than the 2% rise market economists had been expecting.
It was also a partial rebound from the 3% plus fall in January.
Total housing finance by value rose by 2.9% in February, seasonally adjusted (from January), to $27.644 billion.
Investment housing by value rose 4.4% in the month, but finance for housing for owner-occupiers rose less than half that rate, or 1.9% month on month.
Previously investors had played the major role in driving finance for the purchase of existing homes.
But the new story is the rapid growth in construction of new homes by owner-occupiers ($1.732 billion in February, on a trend basis) and investors $772 million.
That’s a total of more than $2.5 billion, or an annual rate in excess of close to $30 billion.
The dollar amount is up 32% in the past year, or $600 million (from a total of $1.9 billion in February 2013).
That’s $10 billion or more a year in extra new home construction activity.
Seasonally adjusted lending for investor new home construction topped the $1 billion mark in February, the highest since 2008.
First home buyers continued to drop out of the market, with their share of new loans falling to a new low of 12.5% from 13.2% in January.
That was to be expected in a market where there was a solid gain over the month.
However more than 5,800 new loans for first home buyers were approved in February, the highest monthly total for three months.
The ABS said that in trend terms (designed to smooth out seasonally adjusted monthly variations) the estimated total value of dwelling finance commitments excluding alterations and additions rose 1%. Investment housing commitments rose 1.1% and owner-occupied housing commitments rose 0.9%.
In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 2.9%, according to the ABS.
Solid as the performance in February was by investors, their biggest impact can be seen by comparing February this year with the same month in 2013.
Investor finance is up more than 37%, to $10.75 billion in February this year, from $7.823 billion a year earlier.
In fact total investor lending for housing is running at an annual rate of $126 billion in the four months to February.
That’s a third higher than the annual rate a year earlier.
Total housing finance jumped 21.7% in the same time to $27.59 billion in February this year.
And total owner-occupier finance jumped an impressive 27.4% to $16.846 billion, which is a long way from the surging growth in lending to investors – many of whom are self-managed super funds.
When taken with the still solid growth in building approvals (up more than 23% over the year to February), it’s no wonder the housing sector is booming.
That’s as the Reserve bank though it would – eventually, thanks to interest rates at near record lows and the banks madly lending for housing while demand for other forms of finance remain weak.
But the solid performance for housing and building approvals belies the continuing weakness in consumer confidence.
The Westpac Melbourne Institute Index of Consumer Sentiment rose by just 0.3 in April to 99.7.
(A reading below 100 points indicates there are more pessimists than optimists on the state of the economy.)
Westpac chief economist Bill Evans said in a statement that the flat result was mildly surprising, given consumers had reasons to be optimistic.
"Given that the index has fallen by a total of 9.6 per cent since November and that March’s reading appeared to have been impacted by announced job cuts at Qantas and across the vehicle industry, we had expected that some rebound was likely," Mr Evans said.
"That expectation was also supported by the recent positive news around the sharp rise in new jobs for February and ongoing positive news on the housing market."
