Month: February 2015

Building Approvals Remain Strong – Units Rule!

The ABS released their building approvals data for December 2014 today. Another strong result, especially in the unit sector.

ABS Building Approvals show that the number of dwellings approved rose 1.3 per cent in December 2014, in trend terms, and has risen for seven months. the total number of new homes approved in December 2014. This is 3.3 per cent below the record reached in November, although still 8.8 per cent higher than in December 2013.

BuildingApprovalsDec2014
Dwelling approvals increased in December in Tasmania (4.8 per cent), New South Wales (3.2 per cent), Western Australia (0.9 per cent), Queensland (0.8 per cent), Victoria (0.6 per cent) and South Australia (0.2 per cent) but decreased in the Australian Capital Territory (2.5 per cent) and the Northern Territory (1.9 per cent) in trend terms.

StateApprovalsDec2014In trend terms, approvals for private sector houses fell 0.2 per cent in December. Private sector house approvals rose in Victoria (0.5 per cent) but fell in New South Wales (1.4 per cent), Western Australia (0.5 per cent), South Australia (0.4 per cent) and Queensland (0.1 per cent). There are significant state variations, with WA building relatively less units that VIC and NSW as a proportion of all approvals. Nearly 60% of approvals in NSW were for units.  However, nationally, detached house approvals are overall quite consistent at around 9,500 approvals per month. The chart below shows the percentage mix by state of houses to all approvals.

HousingMixStatesDec2014
The value of total building approved rose 0.2 per cent in December, in trend terms, after falling for four months. The value of residential building rose 0.6 per cent while non-residential building fell 0.7 per cent in trend terms.

ValueBuildingWorkDecember2014

 

ABS To Change Method Of Estimating First Home Buyer Loans

The ABS has announced some changes to address under reporting of First Time Buyers in their lending data. Whilst they will publish a more detailed report tomorrow, the current data understates the true position because some lenders report first time buyers based on whether they had a first time buyer grant. Many do not these days. However, they are quiet so far on the question of whether first time buyers going direct to investment properties, should be counted as we explained  recently. Remember all the ABS data is based on lending counts, not property transfer information.

An investigation by the ABS has identified that data on first home buyers is under-reported, as some lenders only report loans to first home buyers who have also received a first home owner grant. Some first home buyers not eligible for the grant were incorrectly excluded.

Since a preliminary investigation was completed in October 2014, users of first home buyer statistics were advised to exercise caution in using first home buyer data until further investigations were complete.

The total value of home lending is separately reported and is not affected.

The ABS and APRA are working with lenders to ensure all loans to first home buyers are recorded in the future, regardless of whether they receive a first home owner grant or not.

In the interim, the ABS will adjust first home buyer data for this under-reporting by modelling estimates based on data provided by lenders that have reported correctly. The estimates will be updated over time as more lenders report correctly.

New CEO Announces New Structure At Westpac

On his first day as the Westpac Group CEO, Brian Hartzer today confirmed his Executive team and their responsibilities, and detailed some of his immediate priorities for the Group.

There are no changes to the individuals within the Executive team.  However, some responsibilities and reporting lines have changed.  These include:

  • As a division, Australian Financial Services (AFS) will no longer exist, with the CEOs of Westpac Retail & Business Banking, St.George Banking Group and BT Financial Group will now report directly to Mr Hartzer.
  • The Technology function will now report directly to the Group CEO (previously reported to the Chief Operating Officer
  • All retail product development, marketing and analytics functions previously within AFS, along with Group-wide operations, will now be the responsibility of the Chief Operating Officer
  • David McLean has been appointed as the CEO of Westpac New Zealand.  Mr McLean has been acting CEO of Westpac New Zealand since August 2014

Mr Hartzer also today outlined his key priorities for the Group.

“We have a clear customer-centric strategy, which has consistently delivered. We are building good momentum and have a number of growth opportunities that over time will help us to continue to increase the value of our franchise. These include digitally transforming our business, increasing our investment in wealth, business banking and Asia, and working more closely with innovation industries and disruptive technologies that are transforming our economy. At the same time, we will continue to improve productivity, and make sure that our risk and business practices continue to set the standard for sustainability, in line with changing regulatory and community expectations. Above all we will continue to invest in our people and the distinctive strength of Westpac’s culture, delivering a service revolution for our customers and strong, consistent, returns for shareholders.”

Housing Market Starts 2015 On Strong Footing – CoreLogic

The January CoreLogic RP Data Home Value Index results showed capital city dwelling values rose by 1.3 per cent over the first month of the year, indicating a strong start for the housing market in 2015.

While the headline reading is strong, overall housing market performance varied substantially between the capital cities. The largest cities, which have more influence over the combined capital city index due to the high number of dwellings, continued to push the aggregate index higher. Melbourne values were up 2.7 per cent over the month and Sydney values increased by 1.4 per cent. Hobart also recorded a strong monthly result with dwelling values up 1.6 per cent. Three capital cities recorded a decline in dwelling values over the month, with Darwin values down 1.3 per cent, Adelaide recorded a 1.2 per cent decline, whilst Perth values were down 0.6 per cent over the month.

RPDataJan2015The quarterly change revealed a clearer picture for housing market conditions, with the combined capitals index recording a 1.9 per cent gain over the three months ending January. While Sydney continued to be the standout for capital gains, the most significant increase in dwelling values over the past three months was recorded in Hobart where dwelling values moved 4.4 per cent higher, eclipsing the 2.4 per cent capital gain in Sydney, which was the second highest quarterly reading across the capitals.

DFA’s New Household Finance Confidence Index Falls

DFA has just launched a New Household Finance Confidence Index, and so we are going to explain how the index works, and also discuss the initial results. This brief video covers both.

DFA has been surveying households on aspects of their finances for many years. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. We are using this data to create a monthly index – THE HOUSEHOLD FINANCE CONFIDENCE INDEX. The index measures how households are feeling about their financial health.

To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

The overall result for Australian households shows a gradual but significant fall in confidence over the past few months. Whilst a score of 100 would be a neutral result, the latest data to January 2015 came in at only 92.4. So on average, Household Finance Confidence Is Falling.

FCI-Index-Jan-2015
This initially seems quite surprising, because nearly 58 percent of households said their net worth had improved over the past year, thanks to significant rises in house prices. For example in Sydney prices rose on average 12 per cent. In addition, superannuation is growing, and the stock market has been performing quite well. However, a quarter of households were less comfortable with their level of debt compared with last year, reflecting larger mortgages and higher levels of credit card debt.

FCI-Debt-Jan-2015
One third said their real incomes have dropped, partly because overtime is being cut, and partly because average pay increases are lower than inflation has been. Many households have had no increases for several years.

FCI-Income-Jan-2015
In addition, more than 35 percent said their costs of living had risen. Despite recent falls in fuel prices at the bowser, the costs of child care, school fees, electricity and gas, and food more than offset any gains.

FCI-Costs-Jan-2015
Looking at savings, about 30 per cent of households were less comfortable with their level of savings compared with last year.Many are dipping into savings to make ends meet, and others are seeing overall income dropping because of falling interest rates.

FCI-Savings-Jan-2015
Finally, nearly one fifth were less confident of their job security than a year ago.

FCI-Job-Security-Jan-2015
Now, these are national results. Whilst the survey is completed at a segment level, and by each state, this more granular data is not available in this post.

We will be updating the confidence index each month, and will post the results on the DFA blog. You can of course subscribe to receive updates.