A renewed trend towards caution is emerging amongst established Australian home buyers. A trend, that by mid 2011, had already been well established amongst prospective first home buyers. Funds that would normally have gone towards either consumption or real estate activity are now increasingly being stowed away in cash and term deposits. A clear indication that recent optimism about improving economic conditions is waning.
According to just released data from the Australian Bureau of Statistics (ABS), the total number of seasonally adjusted loans for owner occupiers fell by 2.5 per cent in February 2012. A number dragged down by a hefty drop in first home buyer loans in New South Wales, where a September announcement of expiring stamp duty exemptions, on established properties, had seen a pre-Christmas rush to buy.
The widespread caution towards new debt experienced in 2011 has clearly been extended into 2012. As the ABS data shows, loans for the purchase of new dwelling dropped by 10.4 per cent in February, while loans for existing dwellings net of refinancing fell by 4.2 per cent.
Following the release of this data, HIA Chief Economist, Dr Harley Dale has stated that “Leading housing indicators are deteriorating in 2012, pointing to further weakening in already very soft new home building conditions”.
Dr Dale’s comment that “new home building, as a bellwether sector of the Australian economy, is clearly signalling weaker growth in 2012,” is supported by a key element of ABS data which shows that the number of first home buyer commitments, as a percentage of total owner occupied housing, fell to 17.2% in February 2012 down from 20.3% in January 2012.
First home buyers are clearly facing a range of issues which are affecting their confidence to buy, including global economic uncertainty, a lack of interest rate stability and cuts to stamp duty concessions. It is estimated that there were 60,000 fewer first home buyers entering the market in 2011, a trend that is clearly continuing into 2012.
More: First home buyers going into hiding
Conversely, while many are holding back on debt funded property purchases, as a nation we saving at unprecedented rates, with a record $535.6 billion of cash deposits sitting in banks and an annual 10 percent growth savings to January 2012. Tellingly since July 2007, term deposits alone have been growing at an annualised rate of 22.3 per cent a year.
In February 2012 the seasonally adjusted number of loans for new housing (construction and purchase of new) fell by 5.8 per cent in New South Wales, 1.3 per cent in Victoria, 2.1 per cent in Western Australia, and 26.9 per cent in the Northern Territory.
However the picture was not uniformly gloomy as there was a rise of 4.9 per cent in Queensland, 2.8 per cent in South Australia, 18.3 per cent in Tasmania and 7.0 per cent in the Australian Capital Territory.
Compared with a year earlier, the number of home loans approved in February was up by 9.8 per cent nationwide and by 10.0 per cent aside from NSW. However in both cases the larger proportion of the rise was in the first six of the past 12 months. More recently approvals have risen only 1.3 per cent overall and by 2.7 per cent outside NSW.
The number of loans to owner-occupiers, despite the recovery through the middle of 2011, is still below the levels experienced, with only a brief interruption by the global financial crisis, from 2001 through to the end of 2009.
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