ABS – Page 54 – Digital Finance Analytics (DFA) Blog

Whats Really Going On With Investment Housing Lending?

The ABS data on lending finance was issued on Wednesday, and the seasonally adjusted numbers caught the headlines. Housing finance was up 1.7% month on month, and commercial finance was up 5.6%. However, the seasonally adjusted numbers have lots of noise in the data, we we think they obscure what is really going on. So, first we look at the trend data. Overall credit flows fell by 0.9% in the month. Within that secured housing fell 0.6%, whilst secured lending for alternations and additions rose 0.5%. Revolving credit (mainly credit cards) fell 1.7% as households continues to pay off the Christmas binge, but fixed loans rose 0.5%. Commercial fixed loans (which include housing investment loans), fell 1.6%. However, the value of housing investment loans were line ball from last month, so the fall was from other commercial sectors, which is not good.

As a result, we see from the summary chart that the proportion of fix commercial lending NET of housing investment fell, from 28.7% to 28.2%, so in trend terms, lending for commercial purposes continued to fall. Assuming that lending is correlated to prospective economic growth, this is bad news.

On the other hand, lending for investment housing was still very present, and lifted to 35.3% of all secured housing loans. Investment lending still has momentum. Also, now we are seeing more households deciding to stay put and renovate. We expect lending demand for renovations to be strong in coming months.

The other piece of data which is important is the state lending footprint. Some made much of the apparent fall in investment lending in NSW, but taking the original data (there are no trend or seasonally adjusted series), and using a rolling average over 3 months, we see a different story. The best way to look at this is to compare lending for investment housing (sum of new construction and purchase of existing dwellings for rental), compared with all commercial lending. When we look at the series, we do see a small fall in NSW, though with an upward inflection in the latest data. But we see that NSW has a lower relative share of housing investment loans compared with QLD and WA. In fact relatively there has been a greater proportion of investment loans written in these states for since 2011. VIC is also lower, though above NSW. So, the story about the great fall in housing investment momentum in NSW is over done. On the other hand, we should be more concerned about the ongoing investment momentum in QLD and WA, where house prices are set to ease, and mining re-balancing is most at work. We think the risks are higher here.

We are still not seeing sustained commercial investments which are required to drive true economic growth. Housing is still doing too much of the heavy lifting, with household debt as high as it has ever been.

Trend Unemployment Rate Still At 5.8%

The ABS released the labour force data to March 2016. The trend unemployment rate remained at 5.8%, while the seasonally adjusted rate fell to 5.7%. This is a better result than expected by the market.

However, the ABS says trend employment growth in Australia eased from the relatively strong growth seen in late 2015.

In March 2016, the annual trend employment growth rate was 2.2 per cent, down from 2.6 per cent in December 2015 . That’s an increase of around 250,000 persons employed, compared with 300,000 persons.

“In March 2016, the trend employment to population ratio remained at 61.2 per cent. This reflects an increase over the year from 60.8 per cent to 61.2 per cent, while over the same period the unemployment rate decreased from 6.2 per cent to 5.8 per cent,” General Manager of ABS’ Macroeconomic Statistics Division, Bruce Hockman said.

Over the past month, trend employment increased by 7,700 persons to 11,910,000 persons, which equated to a monthly growth rate of 0.10 per cent. This monthly growth rate was below the monthly average over the past 20 years (0.15 per cent), and down from the rate of 0.25 per cent in September 2015.

The trend monthly hours worked in all jobs series decreased by 1.8 million hours (0.11 per cent) to 1,643.7 million hours.

The 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 26,100 in March 2016, while the number of persons unemployed decreased by 7,300. The seasonally adjusted unemployment rate for March 2016 was 5.7 per cent (down 0.1 percentage points) and the seasonally adjusted labour force participation rate remained at 64.9 per cent.

New Dwelling Commencements Down in Dec 2015 Quarter

The ABS building activity data to December 2015, released today, shows the trend estimate for the total number of dwelling units commenced fell 1.5% in the December 2015 quarter following a rise of 0.7% in the September quarter, whilst the seasonally adjusted estimate for the total number of dwelling units commenced fell 5.1% to 53,727 dwellings in the December quarter following a rise of 2.3% in the September quarter.

The trend estimate for new private sector house commencements fell 1.5% in the December quarter following a fall of 1.3% in the September quarter, whilst the seasonally adjusted estimate for new private sector house commencements fell 5.4% to 26,840 dwellings in the December quarter following a rise of 2.8% in the September quarter.

The trend estimate for new private sector other residential building commencements fell 0.7% in the December quarter following a rise of 3.2% in the September quarter, whilst the seasonally adjusted estimate for new private sector other residential building fell 3.8% to 25,733 dwellings in the December quarter following a rise of 3.9% in the September quarter.

However, the trend estimate of the value of total building work done rose 0.3% in the December 2015 quarter, whilst the seasonally adjusted estimate of the value of total building work done rose 1.0% to $24,507.5m in the December quarter, following a rise of 1.0% in the September 2015 quarter.

The trend estimate of the value of new residential building work done rose 1.3% in the December quarter. The value of work done on new houses fell 2.0% while new other residential building rose 5.5%. The seasonally adjusted estimate of the value of new residential building work done rose 2.1% to $13,960.0m. Work done on new houses fell 2.2% to $7,640.8m, while new other residential building rose 7.8% to $6,319.3m.

The trend estimate of the value of non-residential building work done fell 0.9% in the December quarter. The seasonally adjusted estimate of the value of non-residential building work done in the quarter fell 0.1%, following a fall of 1.5% in the September 2015 quarter.

Trend Housing Finance Falls In February

Data from the ABS today shows that the trend housing finance flows in February excluding alterations and additions fell 0.4%. Owner occupied housing commitments fell 0.6%, while investment housing commitments was flat. Owner occupied loans were worth $21 billion, and Investment loans were worth $11.5 billion. The proportion of loans for investment purposes (excluding for refinance) rebounded to 45.4%. Investment housing loans are still in demand.

However, the more dodgy seasonally adjusted data showed that the total value of dwelling finance commitments excluding alterations and additions rose 2.6%. This volatile series is often the one picked up in the press, but the ABS specifically warns about the seasonally adjusted numbers:

Market reactions to regulatory measures implemented by APRA in 2015 has resulted in increased volatility in some of the seasonally adjusted estimates included in this publication, particularly the value of finance commitments for owner occupied housing and investor housing. Care should be taken in interpreting the movements for this reference period, as the seasonally adjusted estimates may be revised in future periods.

Refinancing of existing loans continues to lift as a proportion of all owner occupied loans, from 34.2% to 34.6% of all loans. This reflects the intense focus in the market on refinance by the banks, and the deep discounting on offer. But the value of loans for the purchase of existing property fell 2.9%, whilst the value of refinanced loans fell 1.6%.

In trend terms, the number of commitments for owner occupied housing finance were flat in February 2016 whilst the number of commitments for the purchase of new dwellings fell 1.5%, the number of commitments for the construction of dwellings fell 0.2%, and the number of commitments for the purchase of established dwellings rose 0.1%.

In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 14.7% in February 2016 from 15.1% in January 2016.

The adjusted first time buyer data which includes a count of first time buyers going direct to the investment sector fell slightly, whilst the number of first time owner occupied buyers lifted by 16.3%, from 6,669 to 7,757. The average first time buyer loan fell again by 3.9%, from $338,000 to 327,500, reflecting tighter lending criteria. The average loan size for other borrowers also fell 4.2% from $374,300 to $358,500.

Lending momentum appears to be slowing across most states, though WA, already lower, moved up slightly.

So overall, momentum is easing a little, but demand for refinance is being stoked by the deep discounts on offer, investment property is still being purchase (including by some first time buyers), whilst the average loans values are down in response to the regulatory intervention. Lack of top line loan growth, if it continues, will have serious implications for bank profitability, and house prices. Also, consider those who hold loans currently outside today’s lending criteria, when the banks were lending more freely. Will some of those come home to roost?

Trend Building Approvals Fall Again

According to the ABS, the trend estimate for total dwellings approved fell 0.5% in February and has fallen for 11 months while the seasonally adjusted estimate for total dwellings approved rose 3.1% in February following a fall of 6.6% in the previous month.

The trend estimate for private sector houses approved fell 0.9% in February and has fallen for 10 months while the seasonally adjusted estimate for private sector houses fell 1.2% in February and has fallen for two months.

The trend estimate for private sector dwellings excluding houses fell 0.4% in February and has fallen for 11 months whilst the seasonally adjusted estimate for private sector dwellings excluding houses rose 7.6% in February following a fall of 8.4% in the previous month.

Value-Approvals-Feb-2016 The trend estimate of the value of total building approved fell 0.8% in February and has fallen for seven months. The value of residential building fell 0.7% and has fallen for 10 months. The value of non-residential building fell 1.2% and has fallen for six months.

The seasonally adjusted estimate of the value of total building approved rose 5.3% in February following a fall of 8.9% in the previous month. The value of residential building rose 6.9% following a fall of 9.2% in the previous month. The value of non-residential building rose 2.0% after falling for two months.

Drinking At The Internet Data Well Rises Again

The latest internet activity data from the ABS, to December 2015, shows that both internet speeds and data usage continue to rise. There were approximately 12.9 million internet subscribers in Australia at the end of December 2015. This is an increase of 2% from the end of December 2014. As at 31 December 2015, almost all (99.3%) internet connections were broadband. Fibre continues to be the fastest growing type of internet connection in both percentage terms and subscriber numbers. The number of fibre connections doubled between December 2014 and December 2015 to 645,000 subscribers.

Around half of all internet connections are via a mobile device. DSL has more than 40%, and fibre to the premises is now beginning to register strongly (thanks to NBN roll out).

The year on year changes show that fibre 6 month by 6 month growth is above 50%, making an annual rise of more than 100%. Most other channels were relatively static.

A large number of users now have advertised download speeds of more than 8Mbps – 80% of users in Dec 2015. Close to 20% are between 1.5Mbps and 8Mbps. The ABS does not break out the figures by geographic regions. We think they should. Also, of course, advertised speed and actual speeds delivered are two different things. Data from our digital channels survey indicates that more than half of households experience data rates well below advertised speeds. Those in regional and rural areas had the worst experiences, but we also see a rise in below par speeds in urban areas as service demand rises faster than capacity investment. Slow real speeds have been discussed recently on QandA. Buffering… Buffering….!

For perspective, read this earlier post. We continue to slip down the global rankings. In the report published by Akamai Technologies, Australia fell to 48th place in a global average broadband connection speeds. The report says the average broadband speed for Australia in the fourth quarter of 2015 was 8.2Mbps, down from 46th place when compared to the rest of the world. In terms of average peak internet speeds, at 39.3Mbps, Australia fared badly, dropping to 60th position (down from 46th) in the quarter. This despite Australia’s average and peak internet speeds having increased by 11 per cent and 6.4 per cent year-on-year, respectively.

National data consumption has continue to climb, especially via fixed line broadband. To December 2015, this rose to more than 1,600,000 TBs. The average wireless mobile user consumed around 7gb whilst the average fixed line user consumed close to 250gb. Streaming media services account for a significant proportion of the rise from around 200gb in June 2015.

Dwelling approvals continue to decline in February

The number of dwellings approved fell 0.5 per cent in February 2016, in trend terms, and has fallen for 11 months, according to data released by the Australian Bureau of Statistics (ABS) today.

Dwelling approvals decreased in February in the Northern Territory (9.7 per cent), South Australia (2.1 per cent), Western Australia (1.4 per cent), Queensland (0.8 per cent), Tasmania (0.5 per cent) and New South Wales (0.1 per cent) but increased in the Australian Capital Territory (4.9 per cent) in trend terms. Dwelling approvals were flat in Victoria, in trend terms.

Approvals for private sector houses fell 0.9 per cent in February, while approvals for private sector dwellings excluding houses fell 0.4 per cent, in trend terms.

Private sector house approvals fell in Western Australia (2.2 per cent), New South Wales (1.5 per cent), South Australia (1.3 per cent), Queensland (0.5 per cent) and Victoria (0.3 per cent).

The seasonally adjusted estimate for dwelling approvals rose 3.1 per cent in February following a 6.6 per cent fall in January. The rise in February was driven by dwellings excluding houses (up 7.7 per cent), offset by a 1.0 per cent fall in approvals for houses.

The largest contributors to the overall rise in seasonally adjusted dwelling approvals by state were Tasmania (24.0 per cent), New South Wales (14.4 per cent) and Queensland (9.5 per cent).

The value of total building approved fell 0.8 per cent in February, in trend terms, and has fallen for seven months. The value of residential building fell 0.7 per cent while non-residential building fell 1.2 per cent.

Melbourne our fastest-growing capital

Melbourne is officially Australia’s fastest growing capital city, according to data released today by the Australian Bureau of Statistics (ABS).

Melbourne’s population grew by 2.1 per cent in 2014-15, down slightly from 2.2 per cent last year, but still higher than the next-fastest growing capital, Darwin (1.9 per cent).

Perth, which has been one of the fastest-growing capital cities since the mid-2000s, grew by 1.6 per cent in 2014-15 (down from 1.9 per cent last year) and now sits equal fourth with Brisbane, behind Sydney (1.7 per cent).

“Although Perth’s growth slowed to its lowest rate since 2004-05, it was not the only city to experience weaker growth,” said ABS Director of Demography Beidar Cho.

“Of all the capitals, only Hobart (0.8 per cent), Canberra (1.4 per cent) and Darwin (1.9 per cent) grew faster in 2014-15 than in the previous year”.

Australia’s capital cities accounted for the vast majority (83 per cent) of the nation’s total population growth in 2014-15, with most growth occurring in outer suburban and inner city areas.

The fastest growing areas in each state and territory were Cobbitty – Leppington (New South Wales), Cranbourne East (Victoria), Pimpama (Queensland), Munno Para West – Angle Vale (South Australia), North Coogee (Western Australia), Rokeby (Tasmania), Palmerston – South (Northern Territory), and ACT – South West (Australian Capital Territory).

New South Wales – Sydney is well on target to becoming the first Australian capital city to reach 5 million people, growing by 83,300 in 2014-15 to hit 4.92 million.

Victoria – Melbourne had both the largest (91,600) and fastest (2.1 per cent) population increase of all Australian capital cities in 2014-15.

Queensland – Brisbane’s population may be increasing at its slowest rate for over a decade, but Queensland has some of the largest-growing regional areas in the nation.

South Australia – Adelaide’s outer suburbs may be experiencing the largest population increases, but some of the city’s fastest growth is occurring in its inner areas.

Western Australia – Perth’s growth has slowed to its lowest rate for a decade, increasing by 1.6 per cent in 2014-15 compared with 1.9 per cent in 2013-14.

Tasmania – Although growing at the slowest rate of all capital cities (0.8 per cent in 2014-15), Hobart is the only Australian capital to record an increasing rate of population growth in each of the last three years.

Northern Territory – Darwin remains one of the fastest-growing capital cities in Australia, increasing by 1.9 per cent in 2014-15, second only to Melbourne (2.1 per cent).

Australian Capital Territory – The newly-developed suburbs of Canberra’s Molonglo Valley are the fastest-growing areas in Australia. The population of ACT – South West, which includes the new suburbs of Wright and Coombs, grew by 127 per cent in 2014-15.

Australians intend to work longer than ever before – ABS

Australians aged 45 years and over are intending to work longer than ever before, according to figures released by the Australian Bureau of Statistics (ABS) today.

In the survey conducted in 2014-15, 71 per cent of persons intended to retire at the age of 65 years or over, up from 66 per cent in last survey result of 2012-13 and 48 per cent in 2004-05.

“The survey found that 23 per cent of the persons aged 45 years and over are intending to retire at the age of 70 years or over compared with only eight per cent in 2004-05,” said Jennifer Humphrys from the ABS.

The average intended retirement age is 65 years (66 years for men and 65 years for women).

“The majority of Australians intend to retire between 65-69 years, but the results show that now over a quarter of males 45 years and over plan to work past 70 years.”

The survey commenced a few months after the government announced changes to the current qualification age for the Age Pension.

For those in the labour force who intended to retire, the most common factors influencing their decision were ‘financial security’ (40 per cent for men and 35 per cent for women) and ‘personal health or physical abilities’ (23 per cent for both men and women).

Just over half (53 per cent) reported their main expected source of personal income at retirement as ‘superannuation/annuity/allocated pension’.

“There were some differences reported by those who had already retired compared with those who intended to retire regarding their main (expected) source of personal income at retirement,” said Ms Humphrys.

“While 47 per cent of persons aged 45 years and over who had retired reported a ‘government pension or allowance’ as their main source of income at retirement, only 27 per cent of persons aged 45 years and over who were intending to retire indicated that this would be their main expected source of income at retirement.”

The survey also highlighted the importance of partner’s income as one of the main expected source of funds for meeting living costs at retirement.

“Although personal income was a common expected source for both men (81 per cent) and women (70 per cent), 13 per cent of women expected to rely on ‘partner’s income’ in contrast to only three per cent of men. However, while only seven per cent of those intending to retire were expected to rely on partner’s income, this was reported as the main source of funds for meeting living costs by 26 per cent of the retirees,” said Ms Humphrys.

More details are available in Retirement and Retirement Intentions, Australia (cat. no. 6238.0),

More people moving to Victoria – ABS

Victoria is the most popular destination for people moving from other states. It is also Australia’s fastest growing state at 1.7 per cent, compared to an overall Australian growth rate of 1.3 per cent, according to figures released by the Australian Bureau of Statistics (ABS) today.

ABS Director of Demography, Beidar Cho said that over the year to September 2015, only Victoria and Queensland experienced net increases from interstate migration.

“Victoria gained 11,200 people from interstate migration which is up from 8,500 people in the previous year and Queensland gained 6,900 people, which is up from 5,900 people in the previous year,” Ms Cho said.

All the other states and territories recorded net interstate migration losses with New South Wales recording the largest loss with 7,500 people despite the state growing by 102,200 people over the year ending September 2015. Victoria narrowly exceeded NSW’s growth, with an increase of 102,300 people overall.

Prior to 2010, Victoria’s proportion of Net Overseas Migration (NOM) remained steady at approximately a quarter of all NOM to Australia. This began to change after 2012 when the proportion of NOM to Victoria and New South Wales began to climb as the proportion of NOM to Western Australia and Queensland began to drop. In the year ending September 2015 New South Wales continued to receive the highest proportion of NOM at 40 per cent. Victoria increased its proportion to 33 per cent of Australia’s total whilst WA and Queensland both received around 10 per cent.

Australia’s population grew by 313,200 people (1.3 per cent) to reach 23.9 million by the end of September 2015.

Net overseas migration contributed 167,700 people to the population (7 per cent lower than the previous year), and accounted for 54 per cent of Australia’s total population growth.

Net overseas migration was the major contributor to population change in New South Wales, Victoria and South Australia.

Over the year, natural increase contributed 145,600 people to Australia’s population, made up of 298,200 births (4 per cent lower than the previous year) and 152,700 deaths (1 per cent higher than the previous year).