Lending for new homes subdued but overall property prices recovering in Australia
New home lending remained subdued at the end of 2012 with loans for the construction and purchase of new properties increasing by 1.4% but down 0.5% on a quarterly basis.
The figures from the Australian Bureau of Statistics show that for the December quarter of 2012 the total number of seasonally adjusted loans varied considerably from state to state.
Loans increased by 12% in New South Wales, by 6.4% in Western Australia and by 2.1% in Queensland. They fell by 13% in Victoria, by 8.8% in Tasmania and by 1% in South Australia.
The figures also show that the number of loans was up for new dwellings, down for construction, and basically flat for existing dwellings.
‘Overall, 2012 can be characterised as year where new home lending just managed to climb out of the lows reached in 2011, with lending for construction and purchase of new homes rising by 8% said Housing Industry Association economist Diwa Hopkins.
She said it was encouraging that the New South Wales, Queensland and Western Australia finished off 2012 with positive results as these states will be crucial to an aggregate recovery in new home building.
‘It remains the case that new home lending is among a suite of leading indicators which have yet to clearly signal a broad and sustainable new home building recovery of the scale commensurate with what Australia’s economy and population requires,’ she added.
Meanwhile, the latest index from RP Data shows that home values across Australia’s capital cities were up 1.2% in January, taking the annual movement in dwelling values back into the black with a 1.8% increase over the past 12 months and negating the 1.2% drop in values recorded over the final quarter of 2012.
Since bottoming out in May 2012, dwelling values across the combined capital cities have recovered 3.1% every capital city, apart from Melbourne which is down 0.4%, has recorded an increase in dwelling values over the past year.
The gains in January were mostly focussed within the Brisbane, Sydney and Perth markets where values were up 2%, 1.8% and 1.7% respectively. The Melbourne and Adelaide housing markets remained relatively subdued with dwelling values rising by 0.2% and 0.4% respectively.
According to RP Data’s research director, Tim Lawless, housing market conditions have started the year on a strong footing. ‘These strong January results are likely to have seen some upwards seasonal bias, however the housing market has been on a clear recovery trend since June last year. Capital gains aren't likely to remain this high over the coming months, however we are likely to see the recovery trend continue through 2013,’ he explained.
But he pointed out that despite the improving market conditions in January, dwelling values across the combined capital cities remain 4.6% below their 2010 peak.
‘The latest housing market data adds weight to the argument that interest rates may be at the bottom of the cycle. The Reserve Bank will be watching the performance of the housing market closely, and the positive trend in housing values will dampen calls for further interest rate cuts,’ Lawless added.
Additional data is also pointing towards an improvement in the Australia housing market. The average number of days it takes to sell a property was steadily decreasing prior to the seasonal slowdown in December/January, and the rate of vendor discounting was also on a clear trend of improvement.
According to Mr Lawless, these metrics are a sign that vendors are gradually regaining some leverage in the market. ‘The typical capital city house took 55 days to sell in December last year, a vast improvement from the recent high of 76 days recorded in February last year. Additionally, vendors are now discounting their initial asking prices by an average of 6.6% compared with 7.3% a year ago,’ he pointed out.
‘With stock levels remaining high, it is likely to remain a buyers’ market for some time, however I think we are now seeing some balance return to the negotiation table. Buyers are losing some of their negotiation power and homes are selling faster,’ he added.