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ISCOVER
There’s quite a bit of discussion and debate on the housing and housing finance sector at the moment with some commentators seeing good upside and others seeing a glass half empty.
As always in situations like this, let’s examine the data and then try draw conclusions from it.
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There are indeed a number of positives:
- Housing finance to owner-occupiers rose by 1.8 per cent in May and 10.4 per cent over the last 12 months, with most of this coming from investors which is up almost 24 per cent for the year
- Housing credit growth remains below long term trend at 4.5per cent but appears to be bottoming out as it’s been at the 4.4/4.5 per cent level for the past three or four months; most economic forecasters are predicting 5 to 7 per cent growth for 2013/14
- Auction clearance rates are approaching 2009 levels with Sydney achieving 75/80 per cent consistently over recent weeks and Melbourne in the high 60s; nationally, clearance rates have averaged 63 per cent over the last year compared to 50 per cent in 2012 and 47 per cent in 2011
- Housing prices have been climbing in each capital city, helped in part by low interest rates and an expectation that will fall further; a further 25 basis point reduction is expected in the next few months with some forecasters aggressively picking a 2 per cent cash rate by mid 2014
At the same time, the recovery is predicted to be weaker than previous cycles with households more cautious about taking on additional debt with many still scarred by GFC memories and first home buyers missing in action currently (14.6 per cent of all loans in May compared to 18.1 per cent in May 2012).
In summary, expect ongoing increasing confidence in the housing and housing finance but it would be wise to take the upswing cautiously.
