Rate cut boosts home loans: The number of new owner-occupier housing loans rose by a larger than expected 2.3 per cent in December while the value of loans rose by 3.8 per cent. Owner-occupier loans rose by 2.0 per cent while investment loans rose by 7.5 per cent.
The proportion of first home buyers in the market rose from 20 per cent to 20.9 per cent in December – a near two year high.
Petrol prices set to rise: The national average retail petrol price fell by 2.7 cents to 142.4 cents a litre in the past week. However the singapore unleaded price has surged by $5.31 or 4.5 per cent in the past week pointing to higher fuel prices in a fortnights time. CommSec tips a 3 cent rise in pump prices over the next fortnight.
Consumers say no to debt. The average credit card limit grew by just 0.9 per cent over the past year – the slowest growth on record (17 years).
The average credit card balance rose by $16.50 to $3,349.90 in December. In smoothed terms the average credit card balance was up just 1.7 per cent on a year ago – the slowest pace in 21 months.
What does it all mean?
Property prices might be still falling but there are signs that the housing sector is starting to turn the corner. The latest housing finance data certainly provides a degree of encouragement. Home loans have now increased for nine consecutive months and as we have been saying for some time now it does seem like it will be investor finance that does the bulk of the heavy lifting in getting the housing sector back on its feet. In fact investment loans surged by 7.5 per cent in December after a 2.7 per cent rise in November.
Clearly the rate cuts in both November and December are providing a much needed degree of support to the housing sector - encouraging potential home buyers to get their finances in place. However it is important to highlight that housing finance is a forward looking indicator given that people get their finance organised first and as such it will be a few more months yet before that commitment is turned into stronger sales and solid pickup in activity.
Over the past year Housing construction has been weak across the nation and has been another reason why overall economic growth has been subdued. Having said that there was a modest lift in the number of new construction loans which is certainly a positive step in the right direction.
While there have been modest improvements at the margin, it is clear that the current bout of consumer conservatism shows no signs of thawing. The average credit card limit rose by just 0.9 per cent in 2011 – well below the rate of inflation and the slowest growth pace on record.
And while the average credit card balance rose in December that was largely due to seasonal factors with the onset of Christmas. In fact if you look at the average credit card balance it is growing a slower pace than inflation, up just 1.7 per cent on a year ago in smooth terms – marking the slowest pace of growth since the height of the global financial crisis when consumers were slashing debt. And even if consumers are using their credit cards they are being much more financially savvy - paying it off by the due date. In fact the average credit card balance accruing interest grew by just 0.2 per cent over the past year.
As expected petrol prices eased last week after reaching three month highs. Interestingly the fall in petrol prices is not really a function of significant changes in global conditions but it has more to do with the petrol price discounting cycle.
Since peaking just over a week ago petrol prices have tracked lower however that's where the good news ends. Prices are likely to rise over this week as the discounting shifts direction. In addition the Singapore unleaded price has surged by over $5 in Aussie dollar terms in the past week and should filter through to domestic pump prices in a fortnight's time. CommSec expects pump prices to rise by around 3 cents a litre over the next fortnight.
What do the figures show?
The number of new owner-occupier housing loans rose for the ninth straight month, lifting by 2.3 per cent in December. Excluding the refinancing of dwellings, loans rose by 2.2 per cent.
The number of loans for the construction of homes rose by 2.1 per cent. But the value of loans fell by 0.4 per cent.
The number of loans to buy newly-erected dwellings rose by 2.2 per cent with the value of loans up by 3.0 per cent.
The number of loans for the purchase of established dwellings rose by 2.4 per cent with the value of loans up by 2.5 per cent.
The number of refinancing transactions rose by 2.3 per cent (value up by 2.0 per cent).
The value of new housing commitments (owner occupier and investment) rose by 3.8 per cent in December after a 2.5 per cent rise in November. Owner-occupier loans rose by 2.0 per cent while investment loans rose by 7.5 per cent.
The proportion of first home buyers in the market rose from 20 per cent to a 23-month high of 20.9 per cent in December (long-term average is 20 per cent). Fixed rate loans accounted for 11.7 per cent of all loans in December (a 42-month high), up from 11.1 per cent of loans in November. And the average home loan across Australia stood at $294,100, down 2.2 per cent on a year ago.
According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol fell by 2.7 cents a litre to 142.4 cents a litre in the week to February 12. The metropolitan price fell by 3.9 c/l to 140.9 c/l, while the regional average price fell 0.5 c/l to 145.3 c/l.
Average petrol prices across states over the past week were: Sydney (down 3.1 cents to 140.5 c/l), Melbourne (down 6.1 cents to 137.7 c/l), Brisbane (down 3.2 cents to 144.6 c/l), Adelaide (down 6.8 cents 137.1 c/l), Perth (down 0.7 cents to 142.1 c/l), Darwin (unchanged at 154.2 c/l), Canberra (down 1.1 cents to 149.1 c/l) and Hobart (up 0.1 cents to 150.7 c/l).
Today, the national average wholesale (terminal gate) unleaded petrol price stood at a 134.0 cents a litre, down 0.4 cents from a week ago. CommSec expects the retail petrol price (pump price) to rise 3 cents over the next fortnight.
Last week the key Singapore unleaded petrol price rose by US$6.05 (4.8 per cent) to US$131.75 a barrel. In Australian dollar terms the Singapore gasoline price rose by $5.31 (4.5 per cent) to a $122.98 a barrel.
Credit & debit card activity:
Figures released from the Reserve Bank show that the average credit card balance rose by $16.50 to $3,349.90 in December. The average credit card balance is up 0.7 per cent on a year earlier – the slowest growth rate in 28 months. The number of credit card accounts rose by just 1.5 per cent over the year to December.
Of credit cards attracting interest charges, the average outstanding balance fell by $16.70 to $2,402.70. The average balance accruing interest is up 0.2 per cent on a year ago.
The average credit card limit rose by just 0.9 per cent in the year to December, the slowest growth on record (17 years).
The number of credit card cash advances rose by 4.8 per cent in December. Credit card advances are now down 2.2 per cent on a year ago and have consistently fallen in the past four years.
The number of purchases made on credit cards in December rose by 8.6 per cent however the annual growth rate fell from 2.3 per cent to 0.8 per cent. Total debit card transactions were up by 12.8 per cent on a year ago. EFTPOS only transactions were up 11.0 per cent on a year ago.
The number of cash out only transactions with debit cards was up 8.9 per cent on a year ago in December with the value of transactions up 11.7 per cent. In contrast the number of ATM cash withdrawals were down 2.3 per cent on a year ago with the value of withdrawals down 1.9 per cent.
What is the importance of the economic data?
Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory's metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
What are the implications for interest rates and investors?
The housing market provides useful opportunities for investors. Home prices have been falling, not rising, and interest rates continue to come down. As always it is a case of finding the right property at the right price. Home prices are likely to rise over 2012 as loans get drawn down and more home buyers enter the market. CommSec expects home prices to rise by 5 per cent over the year.
The Reserve Bank is still likely to cut interest rates over the next few months in an effort to support the domestic economy. CommSec expects the next rate cut to take place in May after the release of the March quarter inflation figures.