Newhome loan applications at 16 month high

Posted on July 9, 2009 by peter 
Filed under Australia Mortgage and Finance News · Tagged: , ,

home loanNEW home-loan applications soared to a 16-month high of 63,855 in May, but analysts warn the housing bubble will burst when lucrative government grants to first-home buyers are cut this year.

The average loan has risen 9.6 per cent in the past year to $266,900 on the back of soaring consumer confidence.

Owner-occupiers borrowed $17 billion, the highest monthly amount in 26 years, and a record level of first-home buyers accounted for more than 29 per cent of home loans.

Loans for new construction rose 8 per cent to 6334 – the highest level in seven years and 50 per cent higher than in December.

Erin Ronaldsen, residential research manager at real estate agency CBRE, said first-home buyers had helped prop up the market.

“In all likelihood the withdrawal of the first-home owners grant boost at the end of December, and state-based measures in July 2010, will have a dampening effect on the sub-$500,000 market,” she said.

“We expect falls could reach 10 per cent from the peak in some areas, depending on local market conditions.”

She said Victorian first-home buyers were getting better value than the national average.

The average value of the loan taken out by Australian first-home buyers has risen $20,400 since the introduction of the boost in October, but Victorian loans have risen an average $10,800.

CommSec economist Savanth Sebastian said almost 20,000 first-home buyers took out loans in May and banks were the big winners from the lending boom, writing almost 92 per cent of all loans.

“Consumer sentiment is well and truly out of the doldrums. The combination of rate cuts, fiscal stimulus and the perception that the worst is behind us has seen a substantial shift by consumers to being more optimistic about the future.”

But it all came back to job security, he said.

“With unemployment expected to rise in the next year, sentiment is likely to retreat from this exuberant level.”

Housing Industry Association senior economist Ben Phillips said the number of loans for new dwellings had risen for nine consecutive months, and he pointed to a modest recovery emerging for residential construction.

Possible signs of economic recovery

Posted on April 14, 2009 by peter 
Filed under Australia Mortgage and Finance News · Tagged: , , , , ,

Australia: Analysts believe promising signs are starting to emerge suggesting a recovery, but it is very early days.

Are we really seeing green shoots of recovery? Yes and no, it seems.

Many of the crucial bits of economic performance, which matter most, are looking better.

Bank stocks in the United States have made record climbs out of the ground-zero territory they occupied before.

China’s economy could be bottoming out already, says the World Bank.

Our own stockmarket, after a period of the most extraordinary decline and volatility (40 days with price movements of plus or minus 3 per cent during 2008 – against 14 in 1987), has also kept a steady climb through March and into April.

As unemployment, the critical indicator for most people generally peaks 12 months after the stockmarket has troughed, then perhaps it is not exactly the beginning of the end of the recession, but at least the end of the beginning. A pathway out is in sight, even if it’s a very rocky one.

Nonetheless, the global economy and Australia’s too are still very fragile. Markets are perhaps most of all responding to a lack of bad news, rather than any great surfeit of good news.

And so much bad news has already been factored in already that the bar for a market recovery has been set very low. But there are still things that could make it worse.

Even though stimulus packages are taking hold in China, the World Bank forecasts growth at 6.5 per cent, or below the 8 per cent level needed to stay on top of unemployment – in a country where unemployment also means the threat of social instability.

Take out China’s performance from the rest of Asia and the picture for the region is truly horrible. The integration of the Asian economies into enormous supply chains feeding the developed world was a huge trade and jobs multiplier in the region when times were good, but unravelled at a rate no one foresaw at the end of last year.

The most shocking has been Japan, where industrial production fell by 38 per cent, and where observers of the economy say that not enough people outside the country understand the size of the hit it has taken.

Japan has now borne the weight of the world recession twice. The exports kept it going through a decade-and-a-half of poor growth have been hit savagely as consumers everywhere else recoil from spending. And as the world’s biggest creditor nation, its currency has soared as the Japanese bring their currency home – giving everyone else the free kick of an effective devaluation against the yen.

The danger is that if Japan decides the pain is so great it has no choice but a devaluation of its own, then that could set off a chain of competitive devaluations around the main manufacturing and exporting nations – especially in China.

It was China’s competitive devaluation of the yuan in 1994 that helped sow the seeds of the 1997 Asian financial crisis, so the huge impact of these moves by governments should never be underestimated.

Japan is still Australia’s biggest trading partner in both dollar value and the spread of mineral and rural exports, and whatever happens there affects us profoundly. Japan is also one of the places that could send the world economy off on another nasty skid. There is still plenty of room for miss-stepping before those green shoots really start to grow.