Data Diary

Housing finance – home buyers are heading into hibernation

Posted on 10 March 2010

No surprise that first home buyers have deserted the auction turnstiles with the scaling back of government hand-outs. Depends on how you spin the numbers – doesn’t look too bad from the perspective of the number of FHB (pronounced Fah-BUB) loans to total loans written:

Could almost argue that it’s back to business as usual.  But it’s not.  The number of FHB loans written was down 33% from the January 2009 level and 56% from the May peak.  The last time there were fewer FHB loans was in February 2005.

So in part the poor numbers for FHB’s have been hidden by a fall in non-first home buyers.  The number of loans to this latter group was down 9.5% from January 2009 and was at its lowest level since January 2001!

This can’t all be down to the government closing the purse a little.  It may be that while housing is a necessity, demand isn’t infinitely inelastic.  Perhaps prices are pushing to levels where buyers can’t finance new loans (remember there has been some tightening in credit standards) or at least are taking pause to consider whether it is sensible given recent price moves.

Certainly while the number of loans may have dwindled, the average size of loans in aggregate is still on the rise.  So while the average loan size for FHB fell to $284k (from $290k in December), the average non-FHB loan was still rising at $282k (and up 14% year-on-year).

With the media and property analysts trumpeting the stellar house sale results of the last couple of months, there must be some truth to the tattle that the offshore buyers are driving the market.  Wonder whether the government is going to publish data on this?