Despite an end apparently being in sight, Australia’s housing approvals continue to stack on the records, with the year-ended September 2015 being the twelfth successive monthly record. At 227,016 dwellings, approvals for the year were 15.7% higher than for the year-ended September 2014. Expectations that deliberate cooling of loans to investors would slow approvals have proved to be untrue. Investors represented 46.3% of new loans in September 2015, down from a record high 53.5% in August.
Just as pertinent, the proportion of the value of loans going to first home buyers leaped markedly in September, reaching 11.8%, up from 10.7% in August 2015.
The chart below shows Australia’s residential dwelling approvals since October 2011.
To go straight to the dashboard and take a closer look at the data, click here.
The green line shows the successive year-end records and the blue-line provides clear indication of the solid month-to-month approval of houses. The red line shows year-end house approvals. Although the year-ended September 2015 saw house approvals hit a record 115,779 separate dwellings, it is plain to see that these approvals are relatively stable. It is to the apartment market that we have to travel to find the truly remarkable growth.
The chart below displays dwelling approvals, by type for year-end September 2015 and for the prior corresponding period.
To go straight to the dashboard and take a closer look at the data, click here.
Modest growth has occurred in every other type of dwelling, except for apartments (Flats of 4 or more storeys). Everything but apartments are important but at least for now, are frankly unremarkable. It is appropriate that 4+ storey apartments are shown in the red bars because they are quite simply ‘hot’.
For the year-ended September 2015, 4+ storey apartment approvals were 72,260 separate dwellings, up 53.0% on the year-ended September 2014. In this single year, they have gone from representing 24.1% of all dwelling approvals to 31.8% of the total.
There must be an easing to this growth phase at some stage. Bill Evans, Westpac, Chief Economist in addressing the recent HIA Annual Breakfast Briefing event indicated that historically these cycles have all finished with upwards movements in interest rates. However, in his view he sees the outlook for the next two as unlikely to warrant a significant change in interest rate policy.
But it would be a brave participant that called the housing market’s latest boom at an end, right now. That is especially the case because those who played Chicken Little earlier in 2015 when the regulators applied the brakes to loans to investors appear to have been very wrong. The thesis that cooling the role of investors would drag the housing market down and possibly initiate a bust does not, on the current data anyway, have much evidence to support it.
The chart below shows the distribution of housing loans, in billions of Australian Dollars.
To go straight to the dashboard and take a closer look at the data, click here.
As the blue line shows, the value of total loans fell in September 2015, to AUD26.618 billion, a fall of 3.3% from the prior month, which was a record.
The green line shows that loans to investors peaked in April 2015 and have subsequently declined quite sharply. In September 2015, the value of loans to investors fell 8.5% compared with the prior month. As outlined above, that drove investor’s share of loans down to 46.5%. Expectations are reportedly that will fall further in coming months, on a seasonally adjusted basis.
Albeit on a smaller total value of loans, first home buyers are moving their position in the market up. They accounted for 11.8% of total loan value in September 2015.
The Reserve Bank of Australia and banking regulators will, on the face of the data, have been pleased by these combined results. That is because what it may indicate is that a property bust could well be avoided when a downturn does come. Pent up demand for first homes (many of which are clearly apartments), fuelled by sustained low interest rates, is softening the blow that could have come from forcing investors out of the market.
The housing market appears yet to have found its new normal, but we are perhaps starting to get a sense of what it means to our built environment, urban sprawls, inner-urban skylines and the way people live, at least when they first have a home to truly call their own.
