THIS WEEK ABS DATA WAS RELEASED SHOWING THAT THE NUMBER OF HOME LOANS INCREASED 18.9 PER CENT IN WESTERN AUSTRALIA TO THEIR HIGHEST LEVEL SINCE 2009, DRIVEN BY AN INCREASE IN LOANS TO UP-GRADERS (I.E. NON-FIRST HOME BUYERS).
The amount borrowed also rose with both first home buyers and non-first home buyers increasing the amount of money they borrowed by 7 percent compared to February 2012.
Whilst that sounds like a significant leap it is still 30 per cent below the 2007 peak.
We have a long way to go before we talk “records” but things are certainly moving with the rise in both number and size of loans predicable given we are coming out of a long down turn.
Based on ABS statistics, Fixed Loans (FL) and Secured Revolving Home Loans (SRHL) are a relatively small component of the overall market however they provide a very interesting market indicator.
In the current climate of very low interest rates it is probably not surprising that FL increased 28 per cent compared to February last year. The number of FL compared to SRHL is currently higher than any time since the early 1990’s representing 86 per cent of loans in those two categories.
That is not to indicate any negative sentiment in WA, far from it. Rather there is a pragmatism that the conditions are right to invest and there is probably not much room for any major interest rate falls as further cuts would mean the cash rate would be at a record low.
By comparison, in September 2008 (the month Leman Brothers collapsed) SRHL outnumbered FL by nearly four to one. That month the RBA cut the overnight cash rate from 7.25 percent to 7 percent and by April 2009 it was just 3 percent.
For upgraders conditions are now looking positive with the middle market transitioning between a buyer’s and seller’s market. Overall the number of properties on the market has fallen to the lowest level since September 2006 and the number of days on the market plunged by nearly 13 per cent in the three months to December 2012. For those that currently own your own home and want a change this is a call to trade as there is greater certainty that you will be able to sell your house to buy the home you have been dreaming about.