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Newbies get just 7.8% of loan value in April

First-Home buyers continue to be under-represented – in historical terms – in the latest housing finance data. In April, with loans valued at AUD2.076 billion, First-Home buyers received just 7.8% of the value of all loans, as Owner-Occupiers begin to flex the muscle supplied by the appreciation in the value of their existing houses. Meantime, although higher than desirable according to the RBA, Investor loans have fallen back to 47.1% of the total. 

The chart below shows the value of total housing loan approvals (blue line), broken down to show totals for Owner-Occupiers (yellow line) and Investors (green line). The orange bars at the bottom show the value of loans to First-Home buyers. These are generally a sub-set of the Owner-Occupier loans.

fig03

To go straight to the dashboard and take a closer look at the data, click here.

With the total value of loans at AUD26.701 billion in April 2017, Owner-Occupiers saw their share rise to 52.9% of the total. 

While it is an apparently compelling narrative to suggest that First-Home buyers are being squeezed from the market by investors – and there appears to be some truth to this – it must also be true that Owner-Occupier ‘trade-ups’ are keeping the newbies from participating fully in the market.

The alternative view, and it is one which is little discussed and to our knowledge has not been measured, is that there is not an endless supply of First-Home buyers. Perhaps we are reaching a point where their appetite to join the market is actually reaching its natural limits, because they have acquired their first property? It is all to easy, after all, to watch the evening news and hear a young person complaining they cannot enter the housing market and conflate that to mean all potential First-Home buyers are frozen out.

Although it has not been well studied in our view, we can get some clues about this from the data showing what the loans are being issued for. The chart below shows the monthly value of loan approvals for construction of new dwellings and purchase, along with the investor role.

fig04

To go straight to the dashboard and take a closer look at the data, click here.

It is plain to see how Investors have grown their share of total loan value on a monthly basis, and also to see (the blue bars), the importance and stability of loans to Owner-Occupiers for newly constructed housing. There can be no doubt that the stability in approvals of free-standing houses over the last year has been supported by this loan profile.

This is important information, especially on a year-end basis. The value of loans to Owner Occupiers, for new construction is up 4.2% for the year-ended April 2017, valued at AUD21.978 billion, but Owner Occupier purchases of existing housing is up 9.2% over the same period, valued at AUD12.412 billion. However, loans to Investors for new construction rose a smaller 3.7% over the same period and were valued at AUD12.804 billion.

What the data tells us is that ‘trade ups’ and ‘trade outs’ – purchases of existing dwellings – are growing faster than purchases of new construction, by either Owner-Occupiers or Investors.

The year-end comparison chart below shows this on a comparative basis over the last decade. It shows that while loans to Investors for construction have grown sharply, they are now being matched – at least in value terms, if not the longer-term growth rate – by purchases of existing housing by Owner Occupiers.

It seems the market is taking the opportunity created by the sharp rise in housing prices to trade its way up. New home anyone?

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To go straight to the dashboard and take a closer look at the data, click here.

 

Posted Date: July 4, 2017

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