Mortgage approvals plunge to nine year lows

Written by admin on May 12, 2010 – 10:32 pm

Mortgage approvals continue to plunge around the country, falling to a nine year low in March. The 3.4% fall was the 6th consecutive monthly fall and is a good indicator of what to expect for house prices in the coming months.

The 26 percent decline from the peak in June 2009 follows an almost identical 28 percent decline in 2008 surrounding the GFC1. A low of 48,374 approvals were recorded in September 2008, one month before the government announced its BOOST to the first home buyers grant, effectively bringing forward demand from many first time buyers and preventing a market correction.

Approvals for March 2010 sit at 48,260. Three weeks ago, the government reversed its decision to streamline foreign investment laws which caused an influx of foreign buyers into the market. In what is a welcome relief, the government decided against interfering with the housing bubble last night with the 2010 Budget.

Its hard to see any price support for the Australian housing market in the months ahead.

» 5609.0 – Housing Finance, Australia, Mar 2010 – The ABS, 12th May 2010.


Posted in Australian Economy, Australian Housing | 12 Comments »

12 Comments to “Mortgage approvals plunge to nine year lows”

  1. FHB dreamer Says:

    As I said before, everyone has been talking about under supply of housing and forgotten about demand! With no first time home buyers market, overseas property investors out of the market due to the law, interest rates up and banks requesting a high deposit for FHB and investment properties, demand looks to be decreasing.
    It looks like its going to be a rough ride for all those greedy investors that have put all their money into property buying up all the 1 and 2 bedroom units preventing 1st time homebuyers from a property to live in!

  2. Tom Says:

    I read in the paper today that “The budget papers show that the Treasurer is not expecting the housing boom to moderate any time soon, with private dwelling investment tipped to jump by 7.5 per cent next financial year.”

    He is also hoping China doesn’t buckle anytime soon, as most, if not all of the promises funded by the China boom.

    Better call that election quick smart.

  3. Peter Sim Says:

    I really like reading all of your posts.

    Would it be possible to put the interest rates on the graph as well as this definitely influences house prices as well I think?

  4. AverageBloke Says:

    The house prices aren’t dropping where I live, in fact they are going up.

    We still have negative gearing, low interest rates, low unemployment and high immigration. All four of these elements would have to be removed or reduced for housing to become affordable.

    In other words don’t get your hopes up.

  5. Roy Says:

    Great article thanks.

    As far as negative gearing, low interest rates, low unemployment and high immigration, thats all very dandy, you still need purchases. After all that is the DEMAND, is it not?..

    With loan applications falling, demand is falling, why is it that so many don’t really understand what supply / demand really is.

    Keep up the great work exposing the great Australian housing bubble.

  6. AverageBloke Says:

    Sorry mate but where I live (Brisbane) houses and units are still selling very quickly. Demand is still high. Even if the price point drops slightly there are still plenty of Investors ready to buy seeing the First Home Buyers are largely irrelevant nowerdays.

    I just can’t see things changing unless there is a massive drop in employment which doesn’t look like happening anytime soon.

  7. BlindSided Says:

    Market corrections are rarely seen by the herd and that is what makes them so spectacular (and brutal).

    In the US, UK and Ireland etc there was “under supply” and a “shortage of housing” and high immigration and low interest rates and and and KABOOM!

  8. Mr Toby Sure Says:

    @Blindsided. Were you being sarcastic? In Ireland for every 5 houses one is empty. there was a total oversupply and it went kaboom! I think you were? 😉

    Lets pick a city, take Sydney as an example. I think it truly is a tale of many towns that make up the sprawl of Sydney. Water parts rich suburbs from less desirable area’s and the sprawling western suburbs are a far cry from the prestigious north shore area’s like Mosman and indeed the Northern beaches.

    Prices drops are indeed hitting areas in the west with many suburbs house prices falling and by the day houses are being repossessed. My question would be; what about the affluent suburbs. lets take the Northern Beaches, will a 2 bed apartment, which 3 years ago would sell for $400k and now is selling for $480k; will we see this price come down and if so, when?

    Anybody got a view on this area?

  9. AverageBloke Says:

    It simply won’t happen. Even if there is a slight drop I have a few friends who are FHB and a few others whom own multiple properties due to the tax payer funded negative gearing scheme, both camps are waiting with baited breath for a slight drop in prices. The FHB’s obviously just want to be able to get a roof over their heads and the Investors want more properties.

  10. AverageBloke Says:

    This is a fantastic article that sums up the whole Affordability Crisis perfectly.

    http://www.abc.net.au/news/stories/2010/05/03/2889223.htm?section=business

  11. BlindSided Says:

    @Mr Toby Sure

    Yes I was being sarcastic. I mean the same people (property lobbyists and central bankers) were saying the same things no bubble and and under supply etc.

    @AverageBloke
    Interesting article, IMO the response to the Henry Tax Review was both disgusting and pathetic but not a surprise since Rudd doesn’t have a pair.

    One of the few constants in life is death, taxes and market corrections.

    The other issue with FHB’s and Investors is that our banks can’t lend at the rates they used to because the source of funds (structured offshore products / exotic instruments) don’t exist anymore (as a result of the GFC) which means they (the big 4) now need to carry the debt on their balance sheets / loan book which is a hell of a lot more risky hence the increasing spread in rates (between the RBA cash rate and the bank lending rate). I think we will see bank rates increase (even if the RBA doesn’t raise rates).

    Australia has one of the highest external debt’s per capita (due to real estate investment) in the world and over the next 12 months our banks need to re-finance/rollover 125 Billion in offshore loans (not including the new one’s). This is going to get interesting.

  12. gary Says:

    wayne swan is a goose