ABS – Page 63 – Digital Finance Analytics (DFA) Blog

March Building Approvals Up By 1.8%

The ABS released the Building Approvals data to March 2015. In trend terms, the number of approvals was 19,333, up 1.8% on last month, and 18.2% from last year. The count has risen for 10 months. The trend estimate for private sector houses approved rose 0.2% in March and has risen for four months. The trend estimate for private sector dwellings excluding houses rose 3.6% in March and has risen for 10 months.

The value of residential building rose 2.5% and has risen for 12 months. The value of non-residential building fell 2.8% and has fallen for four months. As the resource sector packs up its building tools, some are being applied to the residential sector.

However, it is the state by state date which really highlights the true “state” of play. In NSW, we see a strong pickup in unit approvals, driven by investment property demand and high residential prices.

Compare this with WA, where, as the resource boom slides into the dust, approvals are down for both units and houses, though we see the mix is strongly aligned towards houses rather than units.

In SA, approvals are falling, and only a small number of approvals are for units.

In QLD, we see momentum in units, whilst approvals for houses has fallen a little.

Finally, in VIC. momentum is positive, and both houses and apartments are up, with slightly more than half being for units.

Building Approvals Up Again, Especially Units In NSW

Australian Bureau of Statistics (ABS) Building Approvals show that the number of dwellings approved rose 1.8 per cent in March 2015, in trend terms, and has risen for ten months. This continued strength was driven by increases in new flats, units or apartments in residential buildings.

The value of total building approved rose 0.9 per cent in March, in trend terms, and has risen for nine months. The value of residential building rose 2.5 per cent while non-residential building fell 2.8 per cent in trend terms.

The number of dwelling approvals increased in March in New South Wales (4.4 per cent), Tasmania (3.3 per cent), Queensland (3.0 per cent) and Victoria (1.2 per cent) but decreased in Northern Territory (14.6 per cent), Australian Capital Territory (3.8 per cent), Western Australia (1.9 per cent) and South Australia (1.7 per cent) in trend terms.

There are significant state variations with regards to the proportion of approvals relating to houses, lowest in the Sydney region.

In trend terms, approvals for private sector houses rose 0.2 per cent in March. Private sector houses rose in New South Wales (1.8 per cent) and Victoria (1.1 per cent) but fell in South Australia (1.3 per cent), Western Australia (1.3 per cent) and Queensland (0.9 per cent).

The trend value of residential building rose 2.5% and has risen for 12 months. The value of non-residential building fell 2.8% and has fallen for four months. The 6 month average value moments highlights the state variations, with NSW hot, and WA coming off.

ABS Tweaks First Time Buyer Data Again

The ABS released updated data for housing finance for February 2015 today. As a result the number of first time buyers in the data changed a little. The chart below shows the variation on a monthly basis between the latest revisions, and the earlier figures. They warn that further changes should be expected. The net impact is a fall in the count of first time buyer loans written. The total number of loans recorded does not change.

From the December 2014 issue, the ABS changed its method of estimating loans to first home buyers by adjusting for under-reporting by some lenders that only report on those buyers receiving a first home owner grant. Data on first home buyers are collected by the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001. The ABS and APRA continue to work with lenders to ensure that loans to all first home buyers are identified in future, regardless of whether or not buyers receive a first home owner grant.

The model developed by the ABS for lenders who are under-reporting loans to first home buyers draws on the ratio of first home buyers to total loans for those lenders reporting correctly. The new estimation method will continue to be used in future releases. Monthly First Home Buyer Statistics are likely to be subject to future revision, as the modelled component is adjusted to reflect improved reporting by lenders.

The information paper Changes to the method of estimating loan commitments to first home buyers (cat. no. 5609.0.55.003), released on the ABS website on 4 February 2015, describes the new methodology and the extent of revisions to previously published estimates.

Core CPI Right In RBA Target Range

The Consumer Price Index (CPI) rose 0.2 per cent in the March quarter 2015, following a rise of 0.2 per cent in the December quarter 2014, according to data released by the Australian Bureau of Statistics (ABS) today. The CPI rose 1.3 per cent through the year to the March quarter 2015, following a rise of 1.7 per cent through the year to the December quarter 2014. The reading is flattered by a significant fall in fuel.

The underlying rate was 2.4%, right within the RBA target range, a little higher than expected, and as such it will more than likely tip the RBA in “hold” territory next month, when coupled with better than expected previous employment data, and hot Sydney property. Moreover, little evidence that a further cut would change the picture much (other than reducing savers ability to spend).

The most significant price rises this quarter were in domestic holiday travel and accommodation (+3.5 per cent), tertiary education (+5.7 per cent) and medical and hospital services (+2.2 per cent), These rises were partially offset by falls in automotive fuel (—12.2 per cent) and fruit (—8.0 per cent). The decrease in fuel was registered in all fuel types with the quarterly fall the largest since December 2008 and over the twelve months to March 2015, automotive fuel has decreased by 22.5 per cent. This is the largest yearly fall in the history of the series, beginning in September 1973.

Lending Finance Tops Out?

The ABS data today provides an insight into the various categories of Finance to February 2015. The total value of owner occupied housing commitments excluding alterations and additions rose 1.0% in trend terms, whilst the value of total personal finance commitments fell 0.1%. The value of total personal finance commitments fell 0.2%. The trend series for the value of total commercial finance commitments rose 2.9%. Revolving credit commitments rose 4.8% and fixed lending commitments rose 2.1%. So, we see a rise in commercial lending (which of course includes investment property lending.) The rate of momentum in housing lending on the other hand appears to be slowing somewhat.

Looking at the relative share of investment property lending, we see it has turned down from a peak of 30.3% of all commercial lending to just of 29%, but still high compared with 2011. Banks are still preferring to lend for housing, though we are seeing a rise in commercial lending which is not property aligned – this is to be welcomed, and we need to see more, as productive lending to business will translated into real economic growth, whilst lending for property purchase inflates house prices, bank balance sheets, and household net wealth in book value terms.

Turning to housing lending, values still rising and a total of $31 billion was lent for property across all categories in the month. This is a record.

Looking at the mix, 38% was for investment housing, 30% for owner occupation, and 20% for refinance.

We see that just of 50% of secured loans (excluding refinance) were for investment purposes. Refinance was high, in response to the RBA rate cut in February.

Looking at the percentage movements, month on month, we see the rate of growth slowing across the board, with investment lending slowing the most. This could well indicate a potential turning point in the months ahead, despite strong demand for investment property in the system.

Is The Housing Finance Worm Turning?

The ABS Housing Finance data for February 2015 was released today. The trend estimate for the total value of dwelling finance commitments excluding alterations and additions rose 0.8%. Owner occupied housing commitments rose 1.0% and investment housing commitments rose 0.4%. This is the first time growth in owner occupied loans has exceeded investment loans for many months. As a result the proportion of investment loans dropped below 50% for the first time this year. The cut in RBA rates also stimulated demand for the refinance of existing loans. We also see the bulk of investors purchased established dwellings, not newly constructed property.

The trend data (which irons out monthly changes) held investment loans over 50%, but also registered a slight drop.

In trend terms, the number of commitments for owner occupied housing finance rose 0.2% in February 2015. In trend terms, the number of commitments for the purchase of established dwellings rose 0.5%, while the number of commitments for the purchase of new dwellings fell 1.4% and the number of commitments for the construction of dwellings fell 1.1%. The number of loans to owner occupiers buying established homes, excluding refinancing, fell by 0.9 per cent.The overall value of loans made in the month was a record $18 billion, excluding refinancing of existing loans. New construction was up about 2%.

In percentage terms, refinance of loans increased slightly, relative to new loans.

In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 13.7% in February 2015 from 13.6% in January 2015.

If we overlay the DFA modelling of first time investor loans, overall first time buyer activity was up. Remember, also the data refers to loans, not property transfers, and we know form our surveys that additional purchases were made without the need for a mortgage by overseas investors, and local purchases cashed up thanks to the Bank of Mum and Dad.

Finally, the bulk of lending is being done by the banks, relative to credit unions and building societies. The total loans on book was $1.375 trillion.

It is also worth noting that building societies are lending a smaller proportion of investment loans, and the falling trend here, compared with the rising trend in the credit union sector, though both are well below the 34% of banks loan portfolio.