Tag: ABS

New Home Lending falls back in January

Figures released today by the ABS indicate that the volume of loans for new homes eased back during January, said the Housing Industry Association.

During January 2017, the total number of owner occupier loans for the purchase or construction of new homes fell by 1.0 per cent and was 0.4 per cent lower than a year earlier. The volume of loans for new home purchase declined by 0.3 per cent during January with lending for the construction of new dwellings dipping by 1.4 per cent.

In January 2017 the number of loans to owner occupiers constructing or purchasing new homes increased in three states. Compared with January of last year, the volume of loans rose most strongly in Queensland (+13.1 per cent), followed by South Australia (+9.2 per cent) and Victoria (+8.8 per cent). The largest reduction occurred in Western Australia (-9.3 per cent), followed by Tasmania (-3.5 per cent) and New South Wales (-1.2 per cent). The volume of lending rose by 22.1 per cent in the ACT but was down by 54.8 per cent in the Northern Territory over the same period.

“Despite the reduction during January, the actual volume of loans for new homes remains at a very elevated level – about 99,620 loans were made over the year to January 2017,” noted HIA Senior Economist Shane Garrett.

“There are two dynamics going on with respect to new home loans. With 2016 representing the strongest year for new dwelling starts since the end of WWII, a huge number of new homes are now becoming available for purchase making lending volumes in this area accordingly high. However, the number of loans to people constructing their own home has actually been falling back since mid-2014 and this trend has affected overall lending activity,” Shane Garrett concluded.

Investors Boom, First Time Buyers Crash

The ABS released their Housing Finance data today, showing the flows of loans in January 2017. Those following the blog will not be surprised to see investor loans growing strongly, whilst first time buyers fell away. The trajectory has been so clear for several months now, and the regulator – APRA – has just not been effective in cooling things down.  Investor demand remains strong, based on our surveys. Half of loans were for investment purposes, net of refinance, and the total book grew 0.4%.

In January, $33.3 billion in home loans were written up 1.1%, of which $6.4 billion were refinancing of existing loans, $13.6 billion owner occupied loans and $13.5 billion investor loans, up 1.9%.  These are trend readings which iron out the worst of the monthly swings.

Looking at individual movements, momentum was strong, very strong across the investor categories, whilst the only category in owner occupied lending land was new dwellings.  Construction for investment purposes was up around 5% on the previous month.

Stripping out refinance, half of new lending was for investment purposes.

First time buyers fell 20% in the month, whilst using the DFA surveys, we detected a further rise in first time buyers going to the investment sector, up 5% in the month.

Total first time buyer activity fell, highlighting the affordability issues.

In original terms, total loan stock was higher, up 0.4% to $1.54 trillion.

Looking at the movements across lender types, we see a bigger upswing from credit unions and building societies, compared with the banks, across both owner occupied and investment loans. Perhaps as banks tighten their lending criteria, some borrowers are going to smaller lenders, as well as non-banks.

We think APRA should immediately impose a lower speed limit on investor loans but also apply other macro-prudential measures.  At very least they should be imposing a counter-cyclical buffer charge on investment lending, relative to owner occupied loans, as the relative risks are significantly higher in a down turn.

The budget has to address investment housing with a focus on trimming capital gain and negative gearing perks.  The current settings will drive household debt and home prices significantly higher again.

Managed Funds Climb Higher, Again, To $2.8 Trillion

The ABS released their quarterly managed funds data to December 2016, which shows a significant hike in market value, to $2.8 trillion. The asset bubble continues.

At 31 December 2016, the managed funds industry had $2,841.8b funds under management, an increase of $61.4b (2%) on the September quarter 2016 figure of $2,780.4b.

The main valuation effects that occurred during the December quarter 2016 were as follows: the S&P/ASX 200 increased 4.2%; the price of foreign shares, as represented by the MSCI World Index excluding Australia, increased 1.5%; and the A$ depreciated 5.2% against the US$.

Superannuation funds held the largest share of assets.

At 31 December 2016, the consolidated assets of managed funds institutions were $2,237.9b, an increase of $49.2b (2%) on the September quarter 2016 figure of $2,188.7b.

The asset types that increased were shares, $22.9b (3%); overseas assets, $19.4b (4%); land, buildings and equipment, $1.9b (1%); units in trusts, $1.9b (1%); short term securities, $1.8b (1%); deposits, $1.6b (1%); bonds, etc., $1.3b (1%) and other non-financial assets, $0.7b (6%). These were partially offset by decreases in other financial assets, $2.0b (6%) and loans and placements, $0.4b (1%). Derivatives were flat.

At 31 December 2016, there were $498.3b of assets cross invested between managed funds institutions.

At 31 December 2016, the unconsolidated assets of superannuation (pension) funds increased $54.3b (3%), life insurance corporations increased $2.4b (1%), public offer (retail) unit trusts increased $0.3b (0%) and common funds increased $0.2b (2%). Cash management trusts decreased $0.6b (2%). Friendly societies were flat.

 

Retail Turnover Rises In January

Australian retail turnover rose 0.2 per cent in January 2017, in trend terms, following a 0.3 per cent rise in December 2016. Compared to January 2016, the trend estimate rose 3.2 per cent according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.  Victoria showed the strongest growth. We think the lift was thanks to bargains available in the January sales.

Clothing, footwear and personal accessories rose the most in trend terms.

But in seasonally adjusted terms, there were rises in household goods retailing (1.4 per cent), cafes, restaurants and takeaway food services (1.1 per cent), food retailing (0.2 per cent), and other retailing (0.1 per cent).

These rises were offset by falls in clothing, footwear and personal accessory retailing (-0.4 per cent) and department stores (-0.5 per cent). This follows a fall of 0.1 per cent in December 2016.

The main contribution to the rise in household goods retailing was the Electrical and electronic goods industry subgroup, which rose 2.4 per cent in January in seasonally adjusted terms.

In seasonally adjusted terms, there were rises in Victoria (1.1 per cent), New South Wales (0.2 per cent), South Australia (0.6 per cent), Western Australia (0.3 per cent), the Australian Capital Territory (1.2 per cent) and Tasmania (0.4 per cent). There was a fall in the Northern Territory (-0.8 per cent). Queensland was relatively unchanged (0.0%).

Online retail turnover contributed 3.6 per cent to total retail turnover in original terms.

Dwelling approvals continue to fall in January

The number of dwellings approved fell 2.1 per cent in January 2017, in trend terms, and has fallen for eight months, according to data released by the Australian Bureau of Statistics (ABS) today.

Here is the data charted by the HIA. They say “new dwelling approvals have been falling back over the past year, particularly due to a reduced inflow of new multi-unit projects”.

In trend terms, dwelling approvals decreased in January in the Australian Capital Territory (19.4 per cent), Queensland (6.8 per cent), New South Wales (4.8 per cent), Northern Territory (1.7 per cent) and Western Australia (0.3 per cent). Dwelling approvals increased, in trend terms, in Tasmania (3.0 per cent), Victoria (2.9 per cent) and South Australia (1.1 per cent).

In trend terms, approvals for private sector houses fell 1.2 per cent in January. Private sector house approvals fell in New South Wales (2.2 per cent), South Australia (1.4 per cent), Western Australia (1.4 per cent), Queensland (1.0 per cent) and Victoria (0.3 per cent).

In seasonally adjusted terms, dwelling approvals increased by 1.8 per cent in January, driven by a rise in total dwellings excluding houses (6.6 per cent). Total house approvals fell 2.2 per cent

The value of total building approved fell 2.9 per cent in January, in trend terms, and has fallen for six months. The value of residential building fell 0.9 per cent while non-residential building fell 6.8 per cent.

Economy grows 1.1 per cent in December quarter

So Australia dodged the “recession bullet” thanks to a rebound in the December quarter. It was helped by resources sector income from higher prices especially coal and iron ore,  households who raided their savings to lift expenditure over the Christmas season, and Government sector infrastructure spending.

But the underlying contribution from business excluding resources looks weak, and it seems the whole confection of managing the mining sector slow-down by stoking the housing sector is to be questioned.  Growth at 2.4 per cent is lower than the 3 per cent plus target.  Low interest rates are not encouraging business to invest. Even lower rates won’t help.  Low wage growth is part of the problem, but it is a symptom of underlying disease.

Data from the Australian Bureau of Statistics (ABS) shows that the Australian economy recorded broad-based growth of 1.1 per cent in seasonally adjusted chain volume terms in the December quarter 2016, a rebound from the previous quarter’s decline of 0.5 per cent,  Australia’s Gross Domestic Product (GDP) has now grown 2.4 per cent through the year.

Growth was recorded in 15 out of 20 industries. Strongest growth was observed in Mining, Agriculture, forestry and fishing, and Professional scientific and technical services, each industry contributed 0.2 percentage points to GDP growth.

Household final consumption expenditure contributed 0.5 percentage points to GDP growth. Net exports contributed 0.2 percentage points. Public and private capital formation both contributed 0.3 percentage points this quarter after both detracted from GDP growth last quarter.

The Terms of trade grew by 9.1 per cent in the December quarter due to strong price rises in Coal and Iron ore. The terms of trade is now 15.6 per cent higher than December quarter 2015. Nominal GDP grew by 3.0 per cent to be 6.1 per cent higher through the year. Real net national disposable income increased by 2.9 per cent for the quarter.

The strength in commodity prices helped drive a 16.5 per cent increase in Private non-financial corporation’s Gross operating surplus. Compensation of employees decreased 0.5 per cent for the quarter to be 1.5 per cent higher through the year. This is in line with the subdued wage price index (1.9 per cent through the year) and employment growth (0.7 per cent through the year) previously published by the ABS.

Wages growth remains at record low

The seasonally adjusted Wage Price Index (WPI) rose 1.9 per cent through the year to the December quarter 2016, according to figures released today by the Australian Bureau of Statistics (ABS). This result equals the record low wages growth recorded in the September quarter 2016.

Those in the public sector are doing better than in the commercial sector.

Seasonally adjusted, private sector wages rose 0.4 per cent and public sector wages grew 0.6 per cent in the December quarter 2016.

In original terms, through the year wage growth to the December quarter 2016 ranged from 1.0 per cent for mining to 2.4 per cent for health care and social assistance and education and training. Mining industry wage growth has continued to slow over the last three years.

Western Australia recorded the lowest through the year wage growth of 1.4 per cent and Tasmania the highest of 2.4 per cent.

If you correct for inflation, wages in real terms are hardly growing at all.  The trajectory is towards zero!

This is really bad news for those highly in debt households, who on any measure you care to select, have a massive burden thanks mainly to excessive home price growth and mortgage lending. As we have said before, this is a toxic mix, and as mortgage rates rise, as they will, more households will struggle to balance their budgets, dampening discretionary spending and having to wrestle with greater mortgage stress.  According to our research 20% of households would struggle with even a small lift in rates.

The Chill Wind of Underemployment

Whilst the headline ABS data on unemployment may have read ok, there is a critical issue which is having a draining effect on productivity, growth, household incomes and confidence. This is the spectre of underemployment.

The trend data tells the story. There are more than one million people who, though they have some work, want more. This equates to around nine percent of the working population. Some may have just a few hours work each week, yet are counted as employed.

This has a drag effect on wage growth (which is for many at zero currently) and this flows into lower household incomes, despite rising debt and other household costs.

The mirror image is those in full time work but who are working for longer, and out of core hours thanks to the digital transformation in hand. For many of these people, work-life balance is also shot!

Full-time employment increased for fourth straight month

Monthly trend full-time employment increased by 6,500 in Australia in January 2017, according to figures released by the Australian Bureau of Statistics (ABS) today. This was the fourth consecutive month of increasing full-time employment, after eight consecutive decreases earlier in 2016.

The trend unemployment rate was 5.7 per cent for the ninth consecutive month. The trend participation rate was unchanged at 64.6 per cent.

 

Total trend employment increased by 11,700 persons to 11,984,300 persons in January 2017, reflecting an increase in both full-time (6,500) and part-time (5,100) employment. Total employment growth over the year was 0.8 per cent, which was less than half the average growth rate over the past 20 years (1.8%).

“We are still seeing strong growth in part-time employment in January 2017, and in recent months, increasing growth in full-time employment. There are now around 129,800 more people working part-time than there were a year ago, and around 40,100 fewer people working full-time,” said the General Manager of ABS’ Macroeconomic Statistics Division, Bruce Hockman.

The trend monthly hours worked increased by 3.6 million hours (0.2 per cent), with increases in total hours worked by both full-time workers and part-time workers.

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed increased by 13,500 in January 2017. The seasonally adjusted unemployment rate decreased by 0.1 percentage points to 5.7 per cent, and the seasonally adjusted labour force participation rate decreased by 0.1 percentage points to 64.6 per cent.

Lending Still Running Ahead Of Inflation

The latest release from the ABS provides lending flow data to December 2016. It reconfirms the growth in investment property loans at 36% of commercial lending (especially in Sydney which is at a 5 month peak), but also reveals more momentum in lending for other commercial proposes, (potentially a good thing if for productive business purposes) and a Christmas led growth in personal debt. Total trend borrowing grew 1.52%  or $1.9 billion in the month (which would be a 12 month rate of 18.3%), way ahead of the current inflation rate of an annual (yes annual) rate of 1.5%! Total debt flows rose to $73 billion in the month. Australia is borrowing its way to obviation.

Looking in more detail at the trend data (which smooths out the monthly noise), owner occupied loans rose just 0.2% to $20 billion, lending for property alterations fell 0.6%, and personal finance rose 0.69% to $6.9 billion (fixed loans were up 0.52% to $4.4 billion and revolving loans/credit cards rose 0.97% to $2.5 billion.

Investment housing loans rose 1.68% to 13.2 billion, (equivalent to an annual rate of 20.2%) other commercial fixed lending rose 2.86% to $23 billion and revolving commercial loans rose 1.62% to $8.7 billion.

Recent regulator moves are likely to slows investment housing lending in the next few months, but households are burdened with massive debts, which will start to bite should interest rates rise.

Meantime bank shareholders will be “laughing all the way TO the bank” thanks to higher loan volumes and improved margins following recent out of cycle rate rises.