Developers and apartment buyers have a narrowing window of opportunity before Brisbane's Olympic infrastructure pipeline begins competing directly with residential construction, pushing up costs, tightening labour supply and making new projects increasingly difficult to deliver.

While Brisbane's apartment market continues to benefit from strong population growth and limited housing supply, industry research suggests the years leading up to 2027 could prove to be the most important period for developers looking to secure builders and buyers hoping to purchase before the next wave of price increases.

A new Colliers report, Brisbane 2032 Olympic and Paralympic Games: Creating Solutions, highlights the scale of the challenge. While thousands of new homes are planned across South East Queensland, the Brisbane Olympic Athletes Village alone will deliver more than 10,500 beds during the Games before being converted into around 1,750 to 2,000 apartments. Equivalent to almost two years of typical inner-city apartment supply, the project will also absorb a significant share of the construction workforce and building materials.

The broader construction pipeline paints an even clearer picture.

Construction Skills Queensland's Horizon 2032 report forecasts Queensland's annual construction pipeline will average $69 billion over the coming years before peaking at $75 billion in 2027-28. Demand for construction workers is expected to increase by 17 per cent to almost 150,000 people, with the industry facing an annual shortfall of around 19,000 workers that could blow out to as many as 35,000 during the peak construction period.

The Olympic venues, athletes village and supporting infrastructure will account for billions of dollars worth of work across South East Queensland through to 2032, creating intense competition for labour at a time when Australia's residential construction sector is already under pressure.

[smartcode_project:default project_id=150489 project_image_fid=373834]

Colliers Queensland Residential Director Andrew Scriven said the convergence of these projects is creating a clear window of opportunity for both developers and buyers.

"From 2027 onwards, the market will shift dramatically," Scriven said.

"Labour will increasingly be locked into government-led infrastructure and Olympic projects, which means private residential developments will face higher costs and tighter margins. The developers who move now are the ones most likely to get projects off the ground."

Scriven said the same dynamic would also affect buyers, with fewer apartment projects expected to launch once construction capacity tightens.

"If you're looking to change your lifestyle over the next five years, now is your window of opportunity to buy."

[smartcode_project:default project_id=150713 project_image_fid=373827]

Developers are already positioning themselves ahead of that window.

Following the success of Monarch at Toowong, Consolidated Properties is preparing to launch two new Brisbane apartment projects in the second half of 2026. They include <a href="https://www.apartments.com.au/new-apartments/gloriette-30-bedivere-street-yeerongpilly-qld-4105">Gloriette</a> at Yeerongpilly Green, a 25-storey tower within one of Brisbane's key Olympic precincts, and <a href="https://www.apartments.com.au/new-apartments/castile-47-skyring-terrace-newstead-qld-4006">Castile</a>, a recently approved 25-storey riverfront development at 47 Skyring Terrace in Newstead.

Hutchinson Builders will deliver both projects, with early works already underway at Yeerongpilly and Newstead expected to commence later this year.

The timing comes as Brisbane's fundamentals continue to strengthen, with strong interstate migration, population growth and vacancy rates remaining below 1.5 per cent.

Colliers Queensland researcher Pragya Sharma said Greater Brisbane is forecast to require around 40,000 new apartments between 2021 and 2031.

"There's a real mismatch emerging between when housing is needed and when it will be feasible to build," Sharma said.

"As a result, the period leading up to 2027 presents a key window of opportunity for developers to secure approvals, funding and construction capacity, while buyers will have greater choice before supply constraints intensify."

Colliers research outlines a critical pre-2027 window to start residential projects before labour squeeze: now is the time to buy

Joel Robinson

Developers, buyers on watch in South East Queensland ahead of construction crunch: Colliers

It's taken less than nine months for developer Sherpa Property Group to sell out all 51 apartments in its <a href="https://www.apartments.com.au/new-apartments/flourish-oasis-palm-beach-7-9-sixth-avenue-palm-beach-qld-4221">Flourish Oasis</a> development in <a href="https://www.apartments.com.au/developments/palm-beach-qld-4221">Palm Beach</a>, over a year before its anticipated completion.

&nbsp;

Located at 7-9 Sixth Avenue, the $67 million development has resonated strongly with both local owner-occupiers and downsizers seeking high-quality apartments within walking distance of the beach, dining precincts and everyday amenities.

[smartcode_project:default project_id=151449 project_image_fid=357458]

Christie Leet, Founder of <a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Group</a>, said the sell-out reflected both the strength of the Palm Beach market and the success of Sherpa's community-first approach to development.

"The sell-out of Oasis is a fantastic outcome and reinforces the strong demand we're seeing for thoughtfully designed apartments in lifestyle locations," Leet said.

"From the outset, our vision was to create a development that genuinely enhanced the Palm Beach community while providing residents with exceptional homes and wellness-focused amenities.

"We've been incredibly encouraged by the level of local support throughout the campaign, 72.5 per cent of buyers are locals, with a significant proportion of purchasers choosing Oasis as their future home rather than an investment."

[smartcode_project:default project_id=151449 project_image_fid=357463]

Construction is now progressing following development approval, with trusted builder LPS Group delivering the project and completion anticipated in Q3 2027.

Oasis forms part of Sherpa Group's successful Flourish collection, which has become recognised for its focus on wellness, community and elevated coastal living.

[smartcode_project:default project_id=151449 project_image_fid=357469]

Residents will have private access to a rooftop amenity space featuring a pool, gym, sauna, steam room, hot and cold plunge pools, spa and barbecue facilities.

"The success of Oasis demonstrates that buyers continue to prioritise quality, location and lifestyle," Leet said.

"We are proud to have delivered a project that has resonated so strongly with the market and look forward to bringing Oasis to life for our future residents."

Sherpa recently launched <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a>, its third instalment of the Flourish brand in Palm Beach following Flourish Oasis and <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>.

[smartcode_project_cta:default project_id=151449]

Sherpa sells out Flourish Oasis in booming Palm Beach

Urban Property Group's <a href="https://www.apartments.com.au/new-apartments/la-vera-macquarie-park-94-talavera-road-macquarie-park-nsw-2113">La Vera</a> is leading the next phase of Macquarie Park's residential evolution, with the new apartment development set to become the first of several new apartment projects in the precinct to complete.

The 169-apartment building has now topped out ahead of its scheduled completion in the third quarter of 2026, as new residential investment continues to reshape one of Sydney's largest employment hubs into a true mixed-use precinct.

[smartcode_project:default project_id=134951 project_image_fid=368645]

Cox Architecture has designed La Vera to capture the best of its unique positioning on Talavera Road, orienting the building towards Lane Cove National Park.&nbsp;The building features a sculpted northern façade with flowing curves inspired by the surrounding landscape, while its city-facing elevation adopts a more structured architectural expression to maximise skyline views.

"The vision for the project was to conceive a building that adopted an organic and curvilinear form to the northern portion that faces the Lane Cove National Park," <a href="https://www.apartments.com.au/architects/cox-architecture">Cox Architecture</a> Director Felipe Miranda said.

"The residents that reside in the northern portion of the building benefit by having beautifully crafted curved balconies that speak to the natural context and heighten the relationship of their internal living spaces to the external balconies."

[smartcode_project:default project_id=134951 project_image_fid=358802]

La Vera offers a diverse mix of one, two, three, and four-bedroom configurations, with prices currently starting from $740,000. Buyers so far have been a mix of Sydney-based investors,&nbsp;metro commuters, owner-occupiers and downsizers from surrounding North Shore suburbs.

Both investors and owner-occupiers have been drawn to La Vera's proximity to Macquarie University, Macquarie University Hospital, Macquarie Centre and the Sydney Metro, infrastructure that supports both strong rental demand and a convenient lifestyle for residents.

The apartments feature full-height glazing, timber flooring throughout living areas, stone kitchen benchtops, SMEG appliances, floor-to-ceiling bathroom tiling and ducted air conditioning.

Residents will have access to a rooftop recreation level featuring a swimming pool, sauna, barbecue facilities and landscaped relaxation areas, complemented by additional communal space at ground level. Many apartments enjoy uninterrupted views across Lane Cove National Park, reinforcing the project's connection to its natural setting.

[smartcode_project:default project_id=134951 project_image_fid=364551]

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a>, a family-owned developer and builder with nearly four decades of experience, holds a 4.5-star iCIRT rating and was Australia's first developer to introduce 10-Year Latent Defects Insurance (LDI). La Vera is the first apartment development in <a href="https://www.apartments.com.au/developments/macquarie-park-nsw-2113">Macquarie Park</a> approved to offer the additional insurance protection, alongside a five-year warranty on SMEG appliances.

Urban Property Group CEO Patrick Elias said the additional protection reflects changing buyer expectations in the off the plan market.

"Consumers are a lot more weary and a lot more concerned in buying off the plan than they ever have been. Having LDI is a tool to portray the confidence that we have in our product, and a confidence we want buyers to share," Elias said.

Following completion of the building later this year, buyers will move into their apartments well before Christmas.

[smartcode_project_cta:default project_id=134951]

La Vera closes in on completion as Macquarie Park continues residential transformation

Brisbane developer Red &amp; Co's decision to include dual key apartments in its debut Gold Coast apartment development, <a href="https://www.apartments.com.au/new-apartments/como-varsity-lakes-22-lake-street-varsity-lakes-qld-4227">COMO Varsity Lakes</a>, is proving to be one of the project's biggest drawcards, with buyers quickly snapping up the flexible residences.

More than half of the project's 36 dual key apartments have already sold, helping drive COMO beyond the 50 per cent sold mark within the first month of launch.

The strong response highlights growing demand for apartment designs that can adapt to changing lifestyles, with buyers increasingly looking for homes that accommodate multi-generational living, provide rental income opportunities or simply offer greater flexibility over time.

Located on the shores of Lake Orr, COMO will deliver 156 apartments across 16 levels, with the dual-key residences forming a limited release within the broader development.

Each combines a primary two-bedroom apartment with a fully self-contained studio on a single title, connected by a shared foyer and lockable internal door. The design allows owners to house ageing parents, adult children or guests while maintaining privacy, or lease the secondary residence to generate additional income.

Just 17 of the original 36 dual key apartments remain available.

[smartcode_project:default project_id=135546 project_image_fid=367096]

The innovative configuration combines two fully self-contained residences on a single title, typically comprising a primary two-bedroom apartment alongside a separate studio residence, connected via a shared foyer and lockable internal door.&nbsp;

The model is proving particularly attractive to owner occupiers navigating changing family dynamics and the realities of the current housing crisis.&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363511]

<a href="https://www.apartments.com.au/project-marketer/npa">NPA</a>&nbsp;CEO Andrew Erwin said dual key living was resonating strongly with modern buyers because it delivered both financial flexibility and practical lifestyle benefits.&nbsp;

“The housing crisis and rising cost of living are fundamentally changing how Australians think about home ownership,” Erwin said.&nbsp;

“Dual key apartments provide a genuine solution for families who want to stay connected while maintaining independence. Parents can help adult children save for a future home, ageing parents can remain nearby without moving into aged care, and owners still retain privacy and flexibility.

“Importantly, buyers are also recognising the financial advantages. It creates the opportunity to generate additional income from part of the home without the holding costs associated with owning a separate investment property.”&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363509]

Unlike traditional dual occupancy arrangements, the residences operate under a single title, meaning owners only incur one set of body corporate fees, council rates and holding costs.&nbsp;

The secondary residence can also evolve over time - functioning as guest accommodation, a home office, creative studio or private retreat before later becoming an income-producing asset.

<a href="https://www.apartments.com.au/developers/red-co">Red &amp; Co</a>&nbsp;Director and Co-Founder David Laverty said the strong early sales reflected growing buyer urgency and changing priorities within the market.&nbsp;

“Securing more than half of COMO’s residences within such a short timeframe is an outstanding result and a clear endorsement of both the design and location,” Laverty said.&nbsp;

“Buyers are responding to the combination of location, connectivity and amenity, but ultimately it’s value relative to other East Coast markets that is driving enquiry.”&nbsp;

“We’re also seeing strong interest from owner occupiers looking for homes that can adapt with them over time. Flexibility has become one of the most important considerations for buyers in today’s market.”&nbsp;

[smartcode_project:default project_id=135546 project_image_fid=363515]

Designed by <a href="https://www.apartments.com.au/architects/bda-architecture">BDA Architecture</a>, COMO features a mix of one-, two- and three-bedroom residences with 2.7-metre ceilings and larger-format floorplans aimed at owner occupiers, downsizers and lifestyle-focused buyers.&nbsp;

The development will feature an extensive rooftop recreation and wellness offering including a 25-metre lap pool, sundeck, barbecue and dining areas, gym, sauna, plunge baths, landscaped gardens, wellness spaces and rooftop pickleball and paddleball courts.

The remaining dual key apartments range from 137 sqm to 167 sqm and include generous three-bedroom layouts with separate self-contained studio accommodation and dual parking.&nbsp;

Erwin said the dual key concept represented a broader shift in how Australians would live in the future.

“People want homes that can evolve with their lives,” he said.&nbsp;

“A dual key apartment can suit a family today, support an ageing parent tomorrow, and potentially generate income later on. That adaptability is becoming incredibly valuable in the current environment.”

Prices currently range from $2,115,750 to $2,583,000.&nbsp;

[smartcode_project_cta:default project_id=135546]

Inter-generational living drives demand for COMO’s dual key apartments as housing pressures reshape buyer priorities 

Builder-developer&nbsp;<a href="https://www.apartments.com.au/developers/ceerose">Ceerose</a> has doubled down on its Leichhardt ambitions, lodging its second State Significant Development Application (SSDA) in the suburb in the last six months.

Their newest proposal seeks to transform a former industrial precinct into a new residential community centred around the adaptive reuse of one of the site's heritage warehouse buildings.

The new project, on a 6,930 sqm block at&nbsp;<a href="https://www.apartments.com.au/new-apartments/40-76-william-street-leichhardt-nsw-2040">40–76 William Street</a>, will bring more than 200 apartments to a suburb that has seen little to no new supply in recent years. It follows Ceerose's late 2025 SSDA for a mixed-use apartment project on nearby Parramatta Road, signalling the developer's growing investment in Sydney's Inner West.

Ceerose Founder Edward Doueihi told Apartments.com.au the developer’s long-standing presence in Leichhardt and the Inner West had given it a strong understanding of how the area has evolved and where its future opportunities lie.

“Ceerose has had a long-standing presence in Leichhardt and the Inner West, giving us a unique understanding of the area’s evolution and future potential,” Doueihi said.

“Having delivered projects throughout the region, we have witnessed the suburb’s transformation first-hand and understand the opportunities for its continued growth.”

Doueihi said that understanding also informed the planning process, with a comprehensive Stakeholder Engagement Outcomes Report prepared before the application was lodged.

The report identified the key issues and concerns raised by neighbouring residents and other stakeholders, allowing those matters to be considered and incorporated into the design where appropriate.

He said the delivery of additional housing would also play an important role in supporting the revitalisation of Norton Street and the Italian Forum.

“By increasing the local residential population, the development is expected to strengthen demand for local businesses, encourage further investment, and help restore the vibrancy that made the precinct a thriving destination in the early 2000s.”

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="7258c54c-8167-479e-8361-2d5fca9915b4" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010B%20-%20CGI%20-%20View%202.jpg?VersionId=S9DQfxu_jpcB5LrAEYFUbyMzg5odW6i5" />

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a>, the redevelopment would involve the demolition of four existing industrial buildings while retaining and adaptively reusing the site's most significant warehouse. The retained structure would anchor a new residential precinct comprising five interconnected buildings arranged around a large central landscaped courtyard, with heights stepping from five storeys along the surrounding residential streets to 11 storeys at the William Street corner.

According to the Architecture Design Report by Woods Bagot, the proposal "seeks to create a residential village centred around a generous green heart while celebrating the site's industrial heritage through the adaptive reuse of the existing warehouse building."

The development would comprise 203 apartments, with 188 proposed as build-to-sell residences, alongside 15 affordable housing apartments.

Rather than treating the retained warehouse as a standalone heritage object, Woods Bagot has sought to weave the site's industrial history throughout the masterplan. The proposal retains the north and west facades of the landmark corner warehouse, while new buildings reinterpret the site's brick-and-steel industrial language through their material palette and architectural expression.

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="9e8c64c2-881b-49e1-8c90-6b6acaaa45b6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010C%20-%20CGI%20-%20View%203.jpg?VersionId=Qm8_8H_Xrg_sc4Mdjc59vlAcKF_5wRTb" />

The design is organised around what Woods Bagot describes as a "green heart", a landscaped communal open space that reinstates the leafy character removed when the site became an industrial storage facility. A new pedestrian laneway running through the site would improve permeability between William, North and Francis streets, linking residents through landscaped public spaces while activating the ground plane.

Residents would have access to communal gardens and shared recreation areas distributed throughout the development. Sustainability has also been prioritised, with the project targeting an average 7.9-star NatHERS rating. Proposed initiatives include rooftop solar generation, rainwater harvesting, passive solar design, naturally ventilated lobbies, extensive cross-ventilation and the reuse of existing building fabric to reduce embodied carbon.

The adaptive reuse strategy became a defining feature of the application after heritage investigations found only one of the site's industrial buildings could feasibly be retained. The Heritage Impact Statement concludes that preserving the key warehouse façades while referencing the site's industrial character throughout the new development provides an appropriate balance between renewal and conservation.

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="efffafdb-594f-4e2b-a067-921fd51c05e1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010D%20-%20CGI%20-%20View%204.jpg?VersionId=DPmE4.k16YRt0i27hEZVtJAffarpvUfx" />

"Retention and adaptation of the site buildings has been explored but found not to be feasible except for the tallest building, whose street facades will be retained," the heritage report states.

"The proposed building will interpret the brick and steel character of the subject site, including reuse of some components and construction of a large 'sawtooth' structure in the proposed open space."

<img alt="First look: Ceerose returns to Leichhardt with 203-apartment adaptive reuse proposal at former warehouse site" data-entity-type="file" data-entity-uuid="3bfef2b5-83f5-40cd-9cab-767092f34266" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%2010E%20-%20CGI%20-%20View%205.jpg?VersionId=7asb3i_ql4ybbuJOUb5UHBEIy0Q9t.DF" />

The William Street site is located around 300 metres from Leichhardt North Light Rail station and a short walk to Norton Street's retail, dining and hospitality precinct. The surrounding area has increasingly become a focus for urban renewal given its proximity to public transport and the Parramatta Road corridor.

Doueihi founded Ceerose in 1998 and has grown the business to become one of Sydney's more active apartment developers in recent years, with completed projects including The Alex Collective in Alexandria, Abbie's Lane in Annandale, and the award-winning Munro House in Elizabeth Bay. They are currently delivering Belgravia, 17 luxury apartments in Potts Point.

First look: Ceerose doubles down in Leichhardt with adaptive reuse of former warehouse site

Housing Finance

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<div>Following APRA's actions to slow investor lending, annual credit growth in this sector has fallen very sharply over the past 9 months from 11 percent to 7 percent, with undoubtedly more declines to come.</div>
<div> </div>
<div>The Reserve Bank's Financial Aggregates figures for March showed that housing credit has continued to switch its focus towards homebuyers, with annual owner-occupier credit growth increasing to a 66-month high of 7.2 percent.</div>
<div> </div>
<div>The net result is that annual housing credit growth has gradually moderated to 7.2 percent, from a cyclical peak of 7.5 percent six months previously.</div>
<a href="/images/2016/05/02/A1.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/02/A1.jpg" alt="">
 Overall credit growth in the economy has also eased back to an annual pace of 6.2 per cent. 
<a href="/images/2016/05/02/A2.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/02/A2.jpg" alt="">
 Business and banking
<div>Business credit growth notched up a result of only 0.3 per cent growth for the month, with the annual pace of growth steady at 6.5 per cent.</div>
<div> </div>
<div>This mirrors softening trends suggested elsewhere such as in the ABS lending finance data series, while initial and secondary capital raised on the securities exchange has also slowed in 2016.</div>
<div> </div>
<div><a href="/images/2016/05/02/A4.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/05/02/A4.jpg" alt=""></div>
<div> </div>
<div>The cost of business funding is at a record low, but research has shown that expected returns and hurdle rates can be a more important driver of business or project funding decisions.</div>
<div> </div>
<div>In terms of bank lending and funding, although growth in term deposits has been understandably weak in the prevailing low interest rate environment, the growth in other bank deposits has been hugely strong.</div>
<div> </div>
<div>Combined with equity raisings this means that banks will have few problems meeting their funding requirements in 2016, strong deposit growth and capital raised helping to offset any moderate rising in funding costs.</div>
<a href="/images/2016/05/02/a3.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/02/a3.jpg" alt="">
 
<div>Bank funding costs declined significantly in 2015 in any event, and sit way below the levels seen in 2012 or during the financial crisis.</div>
<div> </div>
<div>Housing and outstanding credit</div>
<div> </div>
<div>Although the pace of growth has slowed a notch, overall outstanding housing credit has continued to power higher to $1.55 trillion.</div>
<div> </div>
<div>The composition of housing credit has shifted dramatically over the past eight months, with the investor share of outstanding credit having fallen by fully 3 per cent over that timeframe, a remarkably rapid shift in market dynamics exacerbated by loan reclassifications.</div>
<div class="separator"> </div>
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<div class="separator"> </div>
<div>One other curious observation is how personal credit is actually now in decline.  One wonders whether this is related to the growth in the use of mortgage buffers and offset accounts, as it is certainly very unusual to see personal credit going backwards in Australia, even with mortgage repayments at such low levels for many existing homeowners.</div>
<a href="/images/2016/05/02/A6.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/02/A6.jpg" alt="">
<div>Total credit increased by 1.5 percent or $38 billion in the first quarter of 2016 to a grand total of $2.54 trillion.</div>
The wrap
Overall, the result was pretty much as expected on all fronts, with tightening measures restricting the annual growth in housing credit somewhat over the past six months to 7.2 per cent, and total credit growth a bit steadier at 6.4 percent.
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pwargent-M4siyDbqQY

Annual housing credit growth moderating: Pete Wargent

jchancellor-FAypfDUnLy

How are Australia’s states and territories performing? CommSec's Craig James

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The latest Australian housing finance statistics back-up what we already know: the national housing market is starting to cool.
Local housing economists have been pouring water on the notion of a “property bubble” recently, arguing instead that rather than a bubble pop, we are on track for a gradual easing.
And at the aggregate level this is what’s happening. Home loan commitments are continuing to grow. However, this growth is occurring at a rate that has been slowing since the middle of last year.
The seven charts below unpick the latest housing finance figures.
<h2>1. National growth in loans</h2>
<a href="/images/2016/04/18/image-20160415-11420-e5y16g.JPG" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/18/image-20160415-11420-e5y16g.JPG" alt="">
<h4>Data source: ABS Housing Finance, Australia (5609.0), Released 11 April 2016.</h4>
According to data released this week by the ABS, the overall growth in loans for housing increased a modest 1.5% in February (seasonally adjusted terms). Despite a bounce after the slow January month, growth over the past 12 months sits below the last five years' average annual loan commitments. (It’s the same story if we look instead at the value of loans.)
Where the picture gets really interesting is in the change in commitments to loans for the purchase of new dwellings. The number of loans in this category fell over 15% from January into February. Where this was the fastest growing category of housing finance at the end of 2015, it is now the leading area of contraction.
All-in-all this points to a market that, following a recent upsurge in building, is nearing saturation.
<h2>2. Distribution of loans by state</h2>
<a href="/images/2016/04/18/image-20160415-11437-qbrwu7.JPG" target="_blank">Click to enlarge</a>
<h4><img src="/images/2016/04/18/image-20160415-11437-qbrwu7.JPG" alt=""></h4>
<h4>Source data:</h4>
The majority of housing finance is going to property purchases in NSW (30%) and Victoria (28%).
<h2>3. Lending and house prices - National</h2>
<a href="/images/2016/04/18/image-20160415-11426-xqj0gm.JPG" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/18/image-20160415-11426-xqj0gm.JPG" alt="">
<h4>Data source: ABS Housing Finance, Australia (5609.0), Released 11 April 2016; ABS Residential Property Price Indexes (December 2015); CoreLogic Housing Market Update Figures (April 2016)</h4>
Growth in the value of Australian housing loans over time roughly tracks the Australian house price index.
The rapid increase in building, particularly high-density developments in urban growth centres in Sydney and Melbourne, in late-2015 saw loan value growth outpace broader property prices.
As property prices adjust to a new supply-driven equilibrium, easing loan volumes is expected.
<h2>4. Lending and house prices - State-by-state</h2>
<a href="/images/2016/04/18/image-20160415-11420-z4cl5.JPG" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/18/image-20160415-11420-z4cl5.JPG" alt="">
<h4>Source data: ABS Housing Finance, Australia (5609.0), Released 11 April 2016; ABS Residential Property Price Indexes (December 2015); CoreLogic Housing Market Update Figures (April 2016)</h4>
Year-on-year growth in property prices and housing finance by state shows massive diversity. Where Sydney, Melbourne and Hobart (who knew!) have recorded near- and above double digit average property price growth, it is still a struggle for resource-heavy parts of the country.
Brisbane, Perth and Darwin are experiencing the flip-side of the two-speed economy which through the mining boom saw their housing markets pull ahead of Sydney and Melbourne.
<h2>5. Household wealth, income and debt servicing</h2>
<a href="/images/2016/04/18/image-20160415-11461-qtp2ii.JPG" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/18/image-20160415-11461-qtp2ii.JPG" alt="">
<h4>Source data: RBA Household Finances (E2)</h4>
Overall, households are getting more wealth, relative to their income. This is coming from a combination of housing asset and financial asset capital gains.
It comes at a cost, however. Owner-occupier debt as a proportion of income is trending higher. Coupled with an increase in late 2015 of the proportion of income going to mortgage interest repayments, housing affordability issues may soon come into play.
<h2>6. First home owners are missing out</h2>
<h4><a href="/images/2016/04/18/image-20160415-11469-1r1oaly.JPG" target="_blank">Click to enlarge</a></h4>
<img src="/images/2016/04/18/image-20160415-11469-1r1oaly.JPG" alt="">
<h4>Source data: ABS Housing Finance, Australia (5609.0), Released 11 April 2016</h4>
As a proportion of all housing loans, the value of loans going to first-home buyers make up around 15% of the national market, and NSW is the worst place for first-home buyers.
The latest ABS figures show that first-home buyers are making up a smaller and smaller part of the loan market. The proportion of loans to first-home buyers decreased in every state except Tasmania in the beginning of 2016.
First-home owners in NSW make up only 12% of the value of housing finance commitments, the lowest of any state and representing a significant drop-off from a high of around 30% in 2009-10 (after which point the First Home Owners Grant was scaled back).
<h2>7. Big banks are also missing out…</h2>
<a href="/images/2016/04/18/image-20160415-11426-i5j6ep.JPG" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/18/image-20160415-11426-i5j6ep.JPG" alt="">
<h4>Source data: ABS Housing Finance, Australia (5609.0), Release</h4>
Comparing the performance of the banks against non-bank lenders in terms of owner-occupier loan issuance, the traditional banks are lagging.
Banks are feeling the burn doubly: while their grasp of the market is trimmed by a more competitive offering from alternative lenders, the average Australian loan size is also falling.
Smaller loans are partly a response to a national housing market cool-down. It could also be attributed to APRA’s review of lending practices aimed at mitigating risk of property overvaluation introduced in December 2014.
This means the banks have to work harder (and their stock prices appear to be factoring that in!)
Danika Wright is lecturer in Finance, University of Sydney and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/danika-wright-121868" target="_blank">here</a>.
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Australia’s housing finance in seven charts: Danika Wright

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Housing finance data for January 2016 shows that the value of housing finance commitments was recorded at $31.9 billion over the month. 
Based on this figure, mortgage lending fell by -3.4 percent over the month.  Even though the data is seasonally adjusted, we often see falls in mortgage lending over January so perhaps we need not read too much into the fall, however, this is the largest January fall in lending since 2011.
<a href="/images/2016/04/15/Chart-1-1-580x213.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/15/Chart-1-1-580x213.jpg" alt="">
Looking at the two major components of mortgage lending: owner occupier and investors both have recorded a fall over the month. In January there was $20.5 billion worth of finance commitments to owner occupiers and $11.4 billion in commitments to investors. The value of owner occupier commitments fell by -4.3 percent over the month but was 15.9 percent higher year-on-year.
Investor commitments fell by -1.6 percent in January and were -14.8 percent lower year-on-year. With investor demand having slowed over recent months, they now account for 35.6 percent of all mortgage commitments which is virtually right on its decade average after peaking at 43.3 percent of all housing finance commitments in May of last year.
<a href="/images/2016/04/15/Chart-21-580x210.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/15/Chart-21-580x210.jpg" alt="">
Of the $20.5 billion in commitments to owner occupiers in January, $1.9 billion was for construction of dwellings, $1.2 billion was for purchase of new dwellings, $7.2 billion was for refinancing of established dwellings and $10.2 billion was for the purchase of other established dwellings.  Construction of dwellings was the only segment of lending to rise over the month (+0.7 percent) with falls in value of lending for purchase of new dwellings (-5.2 percent), refinancing established dwellings (-2.3 percent) and purchase of other established dwellings (-6.4 percent). 
Despite monthly falls, year-on-year all segments have seen an increase in lending with construction of new dwellings rising 6.1 percent, purchase of new dwellings up 35.6 percent, refinances up 36.0 percent and purchase of other established dwellings having increased by 4.8 percent.  Although lending is up over the past year, there is a clear downwards trend in owner occupier lending, particularly for established dwellings, over recent months.  It will important to monitor whether this trend persists in coming months as it could point to slowing value growth.
<a href="/images/2016/04/15/Chart-3-1-580x213.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/15/Chart-3-1-580x213.jpg" alt="">
Following intervention in the market by the regulator, we have seen a sharp slowdown in lending to the investment segment over the past 8 months.  As earlier mentioned, investors accounted for 43.3% of all housing finance commitments in May of last year with their proportion falling to 35.6% in January 2016.  Looking at the two components, in January 2016 there were $899 million worth of commitments for new construction and $10.5 billion worth of commitments for established housing stock. 
Over the month, the value of commitments fell by -4.2% for new construction and by -1.4% for established housing stock.  Year-on-year the value of lending is 3.2% higher for new construction but -16.0% lower for established stock.  Much like the owner occupier chart, it shows that demand for established stock has eased and is trending lower, albeit at a slower pace.  In fact, the value of commitments for established investment stock is at its lowest level since April 2014.
<a href="/images/2016/04/15/Chart-4-1-580x215.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/15/Chart-4-1-580x215.jpg" alt="">
The CoreLogic Mortgage Index which is published weekly and tracks mortgage activity across our proprietary platforms indicates that January was a weak month for housing finance commitments.  We would expect that housing finance commitments will rise in February and so far March also points to increasing demand.  However, mortgage demand remains lower than it was at the end of last year and lower than it was a year ago.  While housing finance commitments should increase from their January levels it is unlikely that demand will start to grow as strongly as it was in the early part of last year or late in 2015.
The constraints on investment lending have been extremely effective and have resulted in a swift and significant pull-back in demand, in fact the value of investment housing finance commitments in January was -20.0% lower than its April 2015 peak.  Although the CoreLogic Mortgage Index points to a rebound in demand over the coming months, we expect that growth in housing finance commitments will remain more subdued than what we saw over recent years. 
Of course, the direction of housing finance will ultimately be determined by housing demand.  After demand weakened over the second half of 2015 we have seen stronger demand early in 2016 with much stronger auction clearance rates falling property listings in a number of cities and a rise in property transactions.
Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
 
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ckusher-ujnxiKuFQs

Mortgage demand shrinks in January, will it continue throughout 2016? Cameron Kusher

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<div>
Pouf! In case it wasn't obvious, that was the sound of the mining construction boom vanishing into a cloud of coal dust. Let's take a run through recent Lending Finance figures to see what we can learn.</div>
<div>
 Total lending softens again 
</div>
<div>The data for January showed that total lending has pulled back a little from record highs in trend terms. The seasonally adjusted lending finance result in September 2015 had been the highest in 7.5 years, but January saw another weaker month of lending recorded, in part due to the dampening of property investor loans.</div>
<div> </div>
<div>In seasonally adjusted terms total lending was down by -2.9 per cent from December, with the trend inching down over the past four months from a high of $72.9 billion to $71.3 billion. In trend terms total lending is now only +2.1 per cent higher than one year ago, and appears to be softening.</div>
<div> </div>
<div><a href="/images/2016/03/14/A3.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/03/14/A3.jpg" alt=""></div>
<div> </div>
<div>
<div>One of the key narratives over the past six months or so has been that while property investor loans have been stymied, owner-occupier lending has by and large ramped up to take its place. Indeed this has happened to the extent that APRA is now beginning to sense that some of these loan reclassifications might just be a bit fishy. Owner-occupier commitments pulled back a bit in January, although major renovation activity is now increasing at last. <div>Yet overall trend owner-occupier housing commitments of $21.6 billion are an exceptionally strong +18.8 per cent higher than one year ago. </div>
</div>
<div> </div>
<div>Business lending pulled back by a seasonally adjusted -2.5 per cent in January, reflected by the commercial finance trend in the chart below, the softer figures in part reflecting a huge year-on-year decline in commercial loans to the mining sector, although agriculture finance has been rising solidly since 2013. Lease finance, which represents only a small part of total lending finance, increased by 3.7 per cent in January. Here's the summary chart, presented in trend terms:</div>
<div> </div>
<div><a href="/images/2016/03/14/A4.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/03/14/A4.jpg" alt=""></div>
<div> </div>
<div>
Industry &amp; state trends Looking at commercial fixed loans by industry shows that with a couple of mega projects now dropping off the annualised data, commercial financing to the mining sector has shrunk by more than a quarter. Fortunately for the economy at the national level, mining represents only a relatively small part of the total and a number of other industries have helped to pick up the slack, although this is unlikely to be much compensation for the struggling regions. At the state level, Victoria (+13 per cent), Queensland (+11 per cent), and New South Wales (+8 per cent) have all enjoyed a solid uplift in commercial finance over the last year in rolling annual terms, but the other resources states of Western Australia and the Northern Territory have seen activity decline.
</div>
<div> </div>
<div><a href="/images/2016/03/14/A6.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/03/14/A6.jpg" alt=""></div>
<div> </div>
<div> </div>
<div>
<div>Investor lending stymied</div>
<div>
 As noted above, property investor lending has been dampened, to be replaced by a rise in home loan activity. 
</div>
<div>Nowhere has this been more so in evidence than in Sydney where home loan commitments have exploded higher, mirroring a corresponding decline in investor loans. </div>
<div> </div>
<div>The property investor loans figures are not seasonally adjusted, and so are presented below on a rolling annual basis.</div>
<div> </div>
<div>Lately the best performing states for property investment loans have been Queensland, Tasmania, and South Australia, not least because these states did not experience the great boom that New South Wales and Victoria did.</div>
<div> </div>
<div><a href="/images/2016/03/14/A1.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/03/14/A1.jpg" alt=""></div>
<div> </div>
<div>
<div>On the other hand investor activity in the Northern Territory continues to plummet back to monthly volumes last seen five years ago. </div>
<div> </div>
<div>The rolling annual total of property investor loans in the "Top End" has declined by 29.4 per cent in the past year alone, to now be down by 33.9 per cent from the September 2014 peak.</div>
<div> </div>
<div><a href="/images/2016/03/14/A2.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/03/14/A2.jpg" alt=""></div>
<div> </div>
<div>
There is a significant dwelling price correction in the post for Darwin, with rents also having fallen sharply. The wrap <div>Overall, January proved to be a softer month for lending, as might have been expected following on from Wednesday's housing finance data.</div>
<div> </div>
<div>These figures present further evidence of the conspicuous and precipitous decline in mining construction. Total lending finance has eased over the past few months, although the headline figure remains strong enough in historical terms.</div>
<div> </div>
<div>
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>. 
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.
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</div>
</div>
</div>
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Piff, Paff, Pouf the mining construction boom vanishes: Pete Wargent

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The financial media had an arousing day extrapolating the January Housing Finance figures.
Although I didn't have time to read all of the articles, the headlines variously describing these data as confirming a housing downturn, a fall, a cooling, a sinking, and for reasons that weren't entirely clear, even "home loans dropping at their fastest rate in 7 years"!
In actual fact, home loan activity hit its highest level in 7 years last month, while the investor sector has slowed.
Whatevs, it's fairly typical for total dwelling finance to decline by 20 to 30 percent in January as Aussies focus on the beach or their Christmas turkey, so there is obviously a fair bit of reliance on how accurate or otherwise the seasonal adjustments prove to be.
Such data series tend to jump around a bit from month to month, so the important thing to do is follow the trend, and to observe the data in conjunction with other metrics.
The US nonfarm payroll figures represent a fine case in point, with a decline in average earnings of 3 cents in February variously intimated to be one of the biggest falls since Niagara, despite the fact that earnings had increased by 12 cents only in January.
Back to the housing figures, the original data showed total dwelling finance of $25 billion, which was only slightly higher than the total for the preceding January, underscoring the dampening of investor activity.
That said, the chart of original data below may simply be mimicking what happened to CoreLogic-RP Data's mortgage index, which observed platform events declining sharply for the same period before recovering strongly in more recent weeks.
 <img src="https://4.bp.blogspot.com/-5lbDdHSvarE/Vt_gJZwpUTI/AAAAAAAAbv8/XWUp4pI-wZs/s640/A3.jpg" width="640" height="344"> The most obvious explanation for the pullback is that the crackdown on investor finance has run interference on the pace of lending to that sector, as lenders continue to apply more rigorous criteria. Certainly I've come across numerous examples of stymied demand relating to would-be investors who are needing to try several avenues in order to secure finance, and many are having to wait to secure loans (for example, needing time to save larger deposits, or to prove higher levels of serviceability). With interest rate settings as low as they are, there is evidently an enormous pent up demand for investment loans, but APRA has quite sensibly decided not to let the investor sector get any further ahead of itself. There is litte such weakness to be found in the owner-occupier lending sector, with the value of commitments in January well up on last year, and some +42.3 percent higher than the equivalent figure for January 2012. 
<div class="separator"><img src="https://2.bp.blogspot.com/-cclSLOcaxcY/Vt_gJV7wfrI/AAAAAAAAbv4/sov-6_hRf8Q/s640/A2.jpg" width="640" height="356"></div>
 There has been a high volume of refinancing in recent weeks, which muddies the macro picture somewhat. Construction boom set to peak The residential construction boom and its associated multiplier effect still has legs, but in reality the industry is already going like the clappers in Sydney and some other cities, to the extent that labour costs have spiked to reflect an industry operating at close to its full capacity. This dynamic cannot continue in perpetuity - nor should it - and the downturn in the residential construction sector will likely begin to reveal itself at some point later in the calendar year. While the data charted below are only indicative rather than definitive, they do appear to support the notion of an imminent peak. <img src="https://2.bp.blogspot.com/-L8_4S3F8M0E/Vt_gLG6bmyI/AAAAAAAAbwI/j2F3V_q7ICU/s640/A6.jpg" width="640" height="348"> Similarly the number of new dwellings financed is tracking at a historically high level, but also looks peaky. 
<div class="separator"><img src="https://1.bp.blogspot.com/-BLyGNP_wCq0/Vt_gKf8ZhKI/AAAAAAAAbwA/Mb0ctNU9yT4/s640/A5.jpg" width="640" height="346"></div>
 First timers &amp; renovations First homebuyers accounted for only an estimated 15.1 percent of dwellings financed in January which is below the long run average, though the Australian Bureau of Statistics does note that this figure is only an estimate since some lenders are not yet reporting correctly. Although conventional wisdom is that first homebuyers are inactive being priced out of the market, comprehensive surveys carried out by Digital Finance Analytics (DFA) have shown that many are opting to get onto the housing ladder as investors, as those of us active in the market are only too aware. Actual first time buyer purchases have been tracking at around 13,000 per month in line with the long run average, with DFA surveys finding that many are using the "bank of Mum and Dad" (and some fortunate souls are buying for cash, thereby escaping being captured by the housing finance data entirely). <img src="https://1.bp.blogspot.com/-U-3JNA5yqVM/Vt_gKGkaAwI/AAAAAAAAbwE/b2EM0peyfWA/s640/A4.jpg" width="640" height="366"> Finally, it has taken a heck of a long time to get things moving but major renovations activity is at last picking up as households enjoy the wealth effect of cheaper mortgage repayments and rising dwelling prices. <img src="https://1.bp.blogspot.com/-28gyyeZ7js8/Vt_gJZoxSLI/AAAAAAAAbv0/O-qKsnqK880/s640/A1.jpg" width="640" height="352"> Sydney clearly leads the way in terms of renovation activity as one would expect. Outstanding research once gain by CoreLogic-RP Data featured on yesterday's national news showed that 18 of the top 20 suburbs with the highest percentage of home equity are unsurprisingly located in Sydney. The other two are in Melbourne. The 20 suburbs and towns with the most depressed levels of home equity read like a list of yesterday's regional property hotspots, including but not limited to: Moranbah, Gladstone, Mackay, Whitsundays, Bundaberg, Mount Isa, Rockhampton, Whyalla, Greater Geraldton, and Muswellbrook. Just as in regional New Zealand, the commodities crash has hit much of regional Australia hard. Interestingly, we are presently in the midst of a commodity price mini-boom with oil prices rebounding and iron ore futures again hitting "limit up" during today's trade to hit their highest level since July 2015. While this is potentially a welcome windfall for the budget, don't be headfaked by it - the resources construction collapse still has a long, long way to run, and the deleterious impacts will be felt across many regions for years to come. The wrap Overall, it would be premature extrapolation to read too much in the January figures, even though the trend certainly points towards a considerably lower level of investor activity in 2016 than was the case at the mid-2015 peak. As always, it also pays to recognise that there is one singular "housing market", since some markets are performing very strongly, helping to offset the poor perfomance in many resources regions. News of a downturn would certainly be news to residents of Kingsford in Sydney, where an unrenovated dump on a 499.5 square metre plot sold for a an outrageous $3,065,000 on Saturday (this was more than $1 million over the reserve price, and note the price guide!), having previously fetched $1,015,000 back in March 2008, when many commentators were predicting a price correction. Surry Hills, an inner Sydney suburb with a vacancy rate of just 1.1 per cent, has recorded a series of sprightly results, and doubtless there are plenty of other examples in the inner suburbs of Sydney. House prices in Brisbane are also rising, as I noted yesterday.
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>. 
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.
 
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Were the January housing figures really that bad? Pete Wargent

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GUEST OBSERVER
The January update on housing finance approvals was uniformly weak with the total number of owner occupier loans down 3.9 percent, the value of investor loans down 1.6 percent mth and the total value of all loans down 3.4 percent mth.
The consensus forecast was for a somewhat milder 2.8 percent decline.
It should be noted at the outset that housing data is notoriously unreliable over January with the Christmas holiday period making month to month moves more prone to big changes and revisions.
For finance approvals, the raw data for January usually sees about a 20 percent drop in approvals – adjusting for this can produce more volatility in headline seasonally adjusted estimates.  
The detail showed declines in owner occupier finance approvals across all major states: NSW (–4.6 percent mth); Vic (–1.9 percent mth), Qld (–4.1 percent mth), SA (–2.9 percent mth) and WA (–3 percent mth). Annual growth remains positive for NSW and Vic but is about flat for Qld, tracking at –3.7 percent yr in SA and contracting at a solid double digit rate in WA (–12.3 percent yr). Note that the value of investor loans and therefore the total value of loans is not yet available for states (data to be released on Friday).
Construction-related finance approvals were also down about 3 percent.
Overall, the numbers show a broad-based weakening in momentum although the aforementioned issues with January data mean we will need another month or two to get a firm handle on whether we are seeing a more rapid slowdown. Details  Owner–occupiers (no.)   –3.9 percent mth, 7.3 percentyr        – ex-financing (no.)        –3.6 percent mth, 0.6 percent yr                           Construction of dwellings (no.)               –2.8 percent mth, 0 percent yr            Purchase of newly built dwellings (no.)   –3 percent mth, 22.1 percent yr                         
Value of loans:             
Owner-occupiers ($bn)   –4.3 percent mth, 15.9 percent yr       Investors ($bn)              –1.6 percent mth, –14.8 percent yr      Total ($bn)                    –3.4 percent mth, 2.7 percent yr         Total ex refi ($bn)          –3.7 percent mth, –4.1 percent yr  
 
Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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January owner occupier loans down 3.9 percent: Matthew Hassan

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GUEST OBSERVER
Consumer confidence slipped 2.2 percent in March seeing it continue to lag behind business confidence which is a bit more upbeat.
Both consumer and business confidence are around their long term averages though.
<a href="/images/2016/03/9/image004.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/9/image004.png" alt="">
Source: NAB, Westpac/MI, AMP Capital
Interestingly, all the talk of a crash in the Australian property market looks to have led to a sharp fall in the proportion of Australian’s nominating real estate as the wisest place for savings. It fell from 23.4% in December to 14.7% in March. With interest in shares also falling slightly and superannuation remaining low this saw a renewed spike in interest in bank deposits and paying down debt.
<a href="/images/2016/03/9/image006.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/9/image006.png" alt="">
Source: Westpac/MI, AMP Capital
Housing finance fell a greater than expected 3.4% in January with both finance to investors and particularly owner occupiers falling. The loss of momentum in lending to investors tells us that the APRA measures continue to impact and would probably be welcome by them and the RBA. The slowing in lending to owner occupiers may be more of an issue, but it’s dangerous to read too much into one month’s data. Nevertheless it is consistent with slower growth in housing related debt this year which in turn will likely see slower gains in Sydney and Melbourne property prices compared to last year.
Today’s consumer confidence and housing finance data while soft is unlikely to be enough to prompt the RBA to act on its easing bias just yet.
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds.
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Talk of a crash in the Australian property triggers sentiment shift to wiser investment places: Shane Oliver

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GUEST OBSERVER
The weekly ANZ/Roy Morgan consumer confidence rating rose by 2.2 points (2.0 per cent) to 113.6 in the week to February 14. Confidence is up 3.5 per cent over the year and above the average of 111.4 since 2014. None of the five components of the index fell in the latest week.
Lending: Total new loans (personal, business, housing &amp; lease) fell by 4.0 per cent in December from 7ó- year highs. Total lending is up by 6.9 per cent on a year ago.
Record business lending: In 2015, new commercial loans hit record highs in both Victoria and South Australia.
<a href="/images/2016/02/16/Screen%20Shot%202016-02-16%20at%203.58.36%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/02/16/Screen%20Shot%202016-02-16%20at%203.58.36%20PM.png" alt="">
Reserve Bank Board upbeat on economy: “Members noted that recent domestic data had, on balance, been positive and judged that there were reasonable prospects for growth to increase gradually over the forecast period”.
The lending and consumer confidence figures have implications for finance providers, retailers, and companies dependent on consumer and business spending. The RBA Board minutes provides insights on the interest rate outlook.
What does it all mean?
The Aussie dollar is holding near US71-72 cents; unemployment is at 2-year lows; interest rates are stable; and petrol prices are low. So what’s not to like? Sure the sharemarket has been volatile, but Aussie consumers seem resigned to the fact that is a “normal” situation. And they are looking through the volatility, realising that our economy is in good shape.
The good news for retailers is that consumers continue to believe it is a good time to buy a car, fridge, washing machine or television. Certainly retailers don’t seem to be in a rush to lift prices, so affordability is good.
Discussion about changes to negative gearing wouldn’t have influenced confidence levels for the simple reason that few would be affected by the changes – the proposals largely applying to high income earners with large property holdings.
There were no surprises in the Reserve Bank Board minutes. Of course in recent weeks there has been the interest rate decision, Statement on Monetary Policy and testimony from the Reserve Bank Governor.
The Reserve Bank is closely watching for signs of oversupply in the housing market, but it’s a case of so far, so good.
Businesses are borrowing; you just need to dig for the detail. In 2015, business lending was at record highs in South Australia and Victoria. Lending in NSW was at 7ó year highs. But lending in Western Australia was at 15-month lows.
<a href="/images/2016/02/16/Screen%20Shot%202016-02-16%20at%203.59.59%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/02/16/Screen%20Shot%202016-02-16%20at%203.59.59%20PM.png" alt="">
What do the figures show?
Consumer confidence
The weekly ANZ/Roy Morgan consumer confidence rating rose by 2.2 points (2.0 per cent) to 113.6 in the week to February 14. Confidence is up 3.5 per cent over the year and above the average of 111.4 since 2014.
None of the five components of the index fell in the latest week:
The estimate of family finances compared with a year ago was  up from +6 to +7;
The estimate of family finances over the next year was  steady at +26 points;
Economic conditions over the next 12 months was  up from -11 to -6;
Economic conditions over the next 5 years was  up from +5 to +7;
The measure of whether it was a good time to buy a major household item was  up from +31 points to +34 points.
Lending finance
Total new loans (personal, business, housing &amp; lease) fell by 4.0 per cent in December from 7ó-year high.
Lending has followed a zig-zag course over the last five months. Total lending is up 6.9 per cent on a year ago.
Housing finance: The seasonally adjusted measure of construction and new purchases rose by 0.9 per cent in December while alterations &amp; additions rose by 0.8 per cent. Home loans are up 21.4 per cent on a year.
Commercial finance: The seasonally adjusted series for the value of total commercial finance commitments fell by 7.3 per cent in December after rising by 0.9 per cent in November. Revolving credit commitments fell by 18.3 per cent (+20.9 per cent in November). Fixed lending commitments fell by 3.3 per cent – the third straight decline.
Business loans are up 1.7 per cent over the year.
Over the year to December, total business lending was $535.2 billion, up 9.6 per cent over the year. Lending in South Australia rose by 23.5 per cent followed by Victoria (up 14.9 per cent), Queensland (up 12.3 per cent), NSW (up 9.9 per cent) and Western Australia (down 5.0 per cent). No consistent data was available for other states and territories.
Personal finance: The seasonally adjusted series for the value of total personal finance commitments rose by 2.1 per cent in December after lifting by 1.4 per cent in November. Revolving credit commitments rose by 1.5 per cent and fixed lending commitments rose by 2.6 per cent. Personal loans are down 1.6 per cent over the year.
Within personal fixed finance commitments, loans for new cars were up 9.6 per cent on a year earlier while loans for used cars were down by 1.2 per cent. Loans for residential blocks of land were up by 5.3 per cent on a year ago – the first rise in 14 months.
Lease finance: Lending rose by 1.7 per cent in December. Lease finance rose by 36.9 per cent over the year.
The key quotes from the Board minutes:
Stronger growth expected: “Overall, members noted that recent domestic data had, on balance, been positive and judged that there were reasonable prospects for growth to increase gradually over the forecast period.”
Job market: “Employment growth over 2015 had been stronger than earlier expected and the starting point for the forecast for the unemployment rate was around ó percentage point lower.
Bank funding costs: “Funding costs for Australian banks had increased a little from their low levels recently, reflecting higher short-term wholesale funding costs both in offshore and domestic markets. The cost of new long-term wholesale funding had also increased, but remained below the cost of maturing debt. Members noted that an important issue was the extent to which higher wholesale funding costs led to a rise in deposit rates.”
Services sector: “Output growth in the services sector, particularly household services, had been strong.”
Housing: “Information from liaison contacts indicated that demand for high-density housing in Sydney, Melbourne and Brisbane had been sufficient to absorb the increase in the supply that had come onto the market, whereas demand had been somewhat weaker in Perth, which had experienced a decline in prices and rents for apartments over the past year.”
Housing: “To date, there had not been any substantive signs of financial distress from developers, but there had been an increasing number of projects put on hold, particularly in areas where there were concerns about potential oversupply.”
What is the importance of the economic data?
The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne
Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
Lending Finance is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.
The Reserve Bank releases minutes of its monthly Board meeting a fortnight after the event. The minutes give a guide to Reserve Bank thinking on interest rate settings.
What are the implications for interest rates and investors?
Businesses are borrowing with lending in 2015 not far off the record high set in the mining construction boom era.
Businesses are quietly going about their business, thus raising questions about whether investment is higher than analysts suspect.
The Reserve Bank is showing no inclination of acting on its ‘easing bias’ any time soon.
<a href="/images/2016/02/16/Screen%20Shot%202016-02-16%20at%204.01.14%20PM.png" target="_blank"> Click to enlarge</a>
<img src="/images/2016/02/16/Screen%20Shot%202016-02-16%20at%204.01.14%20PM.png" alt="">
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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Consumers upbeat, Reserve Bank watchful: CommSec's Craig James

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GUEST OBSERVER
Australian housing finance approvals firmed in Dec. The number of new approvals for owner occupiers rose 2.6%, broadly in line with market expectations and consolidating on a 1.9% gain in Nov to be up 9.8%yr. Ex-refi, the number of 'new' loan approvals was up 1.6%mth, 4.6%yr.
Note that changes in lending criteria and borrowing rates for investor loans is indirectly boosting owner occupier activity. Although the bulk of the initial ‘switching’ effect seemed to come through between June and Sep. On the other side of this effect, the value of loans to investors dropped 19% between April and Oct but stabilised in the closing months of 2015, rising 1% in Nov and a further 0.6% in Dec (though still down 13.6%yr).
The total combined value of loans – our preferred gauge of housing demand at the moment given the aforementioned category switching – was up 0.8%mth, 6.4%yr. Growth is significantly flatter once refinance is excluded – the value of refi approvals surged 36% over the year to Dec 2015, accounting for almost all of the growth in the total value of new loans (ex refi, the value of loans is up just 0.2%yr).
Construction-related finance approvals posted a particularly strong month, up 5.2%mth led by 12.4% jump in approvals for the purchase of newly-built dwellings, which incudes 'off the plan' purchases. Note that many of these loans will be post the completion of building rather than a forward indicator of future work. That said, loans for construction were also up 1.8%mth, suggesting a degree of resilience outside the 'high rise' segment that has driven the declinein dwelling construction approvals to date.
Unfortunately, the state detail from the report is of limited use as the value of investor loans and total loans is not available until additional data is published next week. That said, the number of owner-occupier loans ex refi is showing strong gains across both NSW and Vic, with WA the only state showing material weakness.
Overall the picture is of some stabilisation after a sharp investor-led softening over the second half of last year. This weekend’s auction results will be the first meaningful reading on how much this may have carried into 2016. This week's update on consumer sentiment showed assessments of 'time to buy a dwelling' at still weak levels, albeit with some improvement in NSW &amp; Vic. Price measures hint at some firming in recent months although the summer holiday hiatus makes this and other housing data notoriously unreliable over Jan-Feb period.
Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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