ABS Housing Finance (Jun10) – home lending trending lower
Posted on 10 August 2010
ABS Housing Finance figured were released yesterday (here) showing symptoms of rising damp:
The number of home loans continues to fall across all categories. With house prices at highs levels relative to income (see here and here), the odds are shortening that we are due a deeper correction both in the number and size of home loans.
If there was ever any doubt about the role of debt in driving house prices higher (there wasn’t), the ~8% compound growth rate that we have witnessed in the size of the average loan since the start of the 70′s is ample confirmation. We may be an island, but how sustainable is this when the world around us is in the throws of deleveraging from the same trend? At the very least we can question the potency of lower interest rates in stimulating domestic demand in an environment where the Australian consumer is already substantially leveraged. (Note that debt to disposable income has been rising pretty consistently since the 1970′s – from the mid 20′s to around 160% currently.)
Looking to the second chart, there have only been two major dips in average loan size across the available data set. The last occurred when the GST was introduced, and prior to that it was when interest rates climbed into the high teens. What does it take to create a new data point?
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A slowdown in China might do it?
From a longer term perspective, what impacts will a retiring population have on prices?
A serious slowdown in China would have us quaking in our boots I reckon…
Read something interesting on the aging population the other day – initially it might lead to a trade from established houses to inner city apartments as the older folk downsize – longer term the suggestion is that it increases density as these same people move into care…seems to make intuitive sense but haven’t seen any hard data on it
[...] is consistent with recent home lending data (here) and the liklihood that the demand/supply situation looks to be broadly in balance around ~170,000 [...]