Housing finance data for January 2017 was released earlier today by the Australian Bureau of Statistics (ABS). The data showed the over the month there was $33.9 billion in housing finance commitments which was 1.5% higher than the previous month. The value of housing finance commitments in January 2017 was 11.0% higher than it was a year ago.
While the total value of housing finance commitments increased by a seasonally adjusted 1.5% in January, the rise hasn’t been uniform with the value of owner occupier housing finance commitments falling by -0.2% over the month while investor housing finance commitments increased by 4.2%. The value of owner occupier housing finance commitments in January 2017 was -3.7% lower than its peak of $20.9 billion in December 2015. The value of investor housing finance commitments in January 2017 was at its highest level since May 2015 however, it remains -5.3% lower than its historic peak in April 2015 of $14.6 billion.
In January 2017, owner occupier housing finance commitments totaled $20.1 billion, down from $20.2 billion in December 2016. Looking at the type of commitments, there was $1.8 billion for construction, $1.1 billion for purchase of new, $6.5 billion for refinancing of established dwellings and $10.7 billion for purchase of established dwellings. Refinances were the only component of owner occupier housing finance commitments that increased over the month (+2.6%) with construction down -2.3%, purchase of new falling -2.1% and purchase of established dwellings -1.3% lower.
The $13.8 billion in investor housing finance commitments in January 2017 was the highest monthly value since May 2015. The $13.8 billion was split between $1.2 billion for construction of dwellings and $12.6 billion for established dwellings. Over the month, the value of housing finance commitments increased by a seasonally adjusted 34.2% for construction and by 2.0% for established dwellings.
While investor demand has continued to surge in January 2017, owner occupier mortgage demand has continued to cool. There has been an increase in refinancing which may be due to some lenders adjusting mortgage rates which has led to owners shopping around for a better deal.
The ABS publishes non-seasonally adjusted data on the number and the average loan size of housing finance commitments for owner occupier first home buyers. From this data we can derive the monthly value of housing finance commitments to owner occupier first home buyers and their proportion of total commitments. In January 2017, the data shows owner occupier first home buyers committed to $1.9 billion worth of housing commitments, their lowest value in 12 months (again note the data isn’t seasonally adjusted). Nevertheless, by pairing this data with non-seasonally adjusted data for owner occupier non first home buyers, owner occupier refinances and investors, the data shows that first home buyer participation is sitting at just 7.1% of all housing finance commitments, a record low. By comparison, owner occupier non first home buyers make up 34.8% of the market, owner occupier refinances 19.1% and investors 39.0%. Of these four categories, investors are the largest and are significantly greater than first home buyers.
With investor and upgrader demand so substantial currently in the housing market, potential first home buyers are facing higher competition with other segments of the market which is clearly affecting their ability or willingness to participate in the market. Those that already own homes have benefitted from the ongoing value growth across many regions of the country. Subsequently those who already own a home have more housing equity and are able to pay more for those homes as an investment than first home buyers who are likely to be targeting similar properties for owner occupation. Given that owner occupier first home buyer finance commitments are at an historic low it is no wonder the federal government is coming under increasing pressure to do more to assist housing affordability.