On the face of it the building industry is showing signs of rebounding to the satisfaction of the Reserve Bank and the banks – even if there are some early signs of overheating in the Sydney market.
But yesterday’s building finance figures for September from the Australian Bureau of Statistics contains the seeds of deep problems in the sector, and worries for banks and governments further down the track.
And that problem is the damage being done to first home buyers who are now at their lowest share of housing finance on record.
That’s despite generous first home buyers concessions for people building their first home in NSW (the country’s biggest market) and in other states.
But even in NSW, first home buyers are under pressure. In September they made up just 6.8% of new housing loan commitments.
The Australian Bureau of Statistics reported that the number of first home buyer commitments as a percentage of total owner-occupied housing finance commitments fell to 12.5% in September 2013 from 13.7% in August 2013.
That’s the lowest share since the ABS started collecting this data back in July 1991 and well below the average since 1991 of 18.5%.
Therefore the share of non-first home purchases financed hit an all time high in September of 87.5%.
The ABS data shows that since peaking at more than 8,100 in May of this year, the number of first homes financed has plunged 22% to just over 6,360 in September.
And there’s been a sharp fall from September 2012 when the percentage of first home buyers was 19.3% and the number of homes financed was 6,534.
The ABS figures show that a total 51,928 loans were granted to owner-occupiers in September, the biggest number since October 2009, and 4.4% higher than a month earlier and up from 46,111 in September of last year.
That’s a rise of just over 12% in the past year.
The value of these loans was $15.8 billon up 5.3% from August and 13.7% from September of last year.
Loans taken out by investors amounted to $9.4 billon, up 5.2% in a month and a sign of the boom in this area of home buying.
First home buyers being shut out by investors chasing housing deals
Source:ABS
In trend terms (which smooths out the volatile month to month data) the ABS said total housing finance rose 0.4% in the month, the value of owner-occupier housing was up 0.4%, but the value of investor housing jumped 1.5%.
In other words, finance for investor housing grew nearly four times as fast as total finance and owner-occupied finance in September, which points to the problems first home buyers are facing.
First home buyers are being shut out by the surge in home prices and market pressures coming from self-managed super fund investors, offshore buyers and people upgrading their homes. This is especially the case in the hot Sydney market.
And that holds concerns down the track, because if first home buyers can’t join the property market buying existing homes, or are finding that the prices of new homes are being pushed out of reach, then they will be forced to rent – which wild drive up rental costs (and add to inflationary pressures).
And this will mean the pool of new customers for the real estate sector, builders and banks will also start disappearing.
And that in turn is bad news for governments and the RBA because a lack of demand at the bottom of the housing market, especially in new homes, is very bad news because that’s where most of the economic growth and value created in housing springs from.
Total housing finance by value rose 5.3% in September, seasonally adjusted, to $25.151 billion, the Australian Bureau of Statistics said yesterday.
