The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Tuesday, March 13, 2012

Westpac: Underlying improvement in housing finance (and affordability)

From Westpac today:

Housing finance weakened a little in January, with the number of loans to owner-occupiers down by 1.2%. This met our expectations (mkt –0.6% & Westpac –1.0%).

A modest underlying improvement in demand for housing finance is evident. This is in response to improved affordability, which received a boost when the Reserve Bank lowered interest rates by 0.50% over the final two months of 2011.

However, in January, this positive was swamped by a correction to the NSW market. Finance in the state fell by 6.3%, reversing a pull-forward that was triggered by less favourable stamp duty arrangements that commenced from the start of the 2012 year.

For the other states, finance was stronger in the month, with the exception of Qld, which held steady following a 7.2% jump in December.

WA is outperforming, with finance in the mining state rising 3.2% in January, to be 23% higher than a year ago.

Victoria, facing a sizeable increase in new housing supply, is underperforming. Finance in Victoria was broadly flat over the last six months, as it was for South Australia and Tasmania over this period.

There are also divergences across segments.

First home buyers are responding to improved affordability, with lending to this segment advancing by more than 30% over the last half year. However, the "upgrader" market is subdued, with finance to this segment down 3% on last July.

The Investor market is lacklustre at a time of soft house prices. Finance to investors is moving sideways, albeit with considerable month to month volatility.

From here, a further positive response to improved affordability is likely. Note, the average variable mortgage rates is now 7.40%, down from 7.80% last October.