In a confidential research note today (republished with permission), Rory has this to say (excerpt only):
"Australia’s housing market is responding broadly as expected to the 175bp worth of mortgage-rate hikes between October and May.
The ABS today reported that the flow of housing finance (excluding refinancing) is stabilising near $18b per month, down by only about 10% from the peaks near $20b per month in September and October last year (chart).
The moderate decline in housing finance so far reflects a stabilisation of the average loan size near $300k for owner-occupiers alongside a decline in turnover from earlier elevated levels, levels that reflected the much-discussed surge in (pent-up) demand from first-time buyers (chart).
Also as noted here previously, annual turnover of Australia’s housing stock (about 9 million homes) looks to be subsiding towards 5% (that is, one in 20 homes changing hands each year), a figure associated in the past with neither boom nor bust in housing prices (chart and here).
While it’s easy to expect that the flow of housing finance may decline further – given softer housing markets and anecdotes of tighter credit standards – those who see signs of a “bursting bubble” in the housing-finance data might want to think again.
So far, growth in housing credit outstanding has decelerated only from 9% to 8% annualised (first chart above), held up by the smaller principal repayments that tend to come with higher mortgage rates (given unchanged monthly repayments for many of those who borrowed at higher rates).
The bottom line for most is that the uptrend in Australian house prices is flattening. According to RP-Data/Rismark, house prices rose at a 5% annualised rate over April and May after gaining 13% on average over the year to March. Wave "good-bye" to the earlier double-digit growth rates that excited so much silly talk about "bubbles."
