Wednesday, April 6, 2011

Home Loans Lowest in 10 Years!


Home loans dropped for a second consecutive month in February with New South Wales posting its biggest monthly decline in 14 years. The share of first-home buyers shrank further.
The number of home loans fell 5.6 per cent to 45,393 in February, following a revised 6.3 per cent fall in January, according to the Australian Bureau of Statistics. Economists polled by Bloomberg tipped a 2 per cent fall.
The total was lowest number of home loans approved in a month since February 2001.
Home loans in New South Wales plummeted 10.1 per cent in seasonally adjusted terms, the most since February 1997, the ABS reported. Victoria did better than the national average but still saw a drop.
“What’s a little worrying is that there are such big drops in the early part of this year," said RBC Capital markets senior economist Su-Lin Ong. The drop ''has more than wiped the out gains in the second half of last year when we saw a string of modest increases and what looked to be a little bit of resilience in households and housing in general,” she said.
Demand for home loans has sagged in 2011, after flooding in Queensland and parts of Victoria interrupted the sales cycle in those markets. Also, auction clearance rates have slumped to about 60 per cent in recent weeks in some capitals - well down from the 80 per cent levels seen a year ago - as high prices, rising interest rates and economic uncertainty deter buyers.
"Home loan demand clearly struggled amid intense flooding across the eastern states in the early part of 2011, keeping homebuyers, investors and builders on the sidelines," said Moody's Economy.com analyst Matthew Circosta. "Prior to January, home loan demand had been recovering on the back of falling unemployment and rising incomes, even amid higher borrowing costs."
In raw terms, the share of first-home buyers as a percentage of the total dropped to 14.9 per cent in February, the lowest ratio since June 2004. The share fell from 15.2 per cent in January, and is barely half the peak of 28.5 per cent in May 2009 when the federal government offered incentives to draw in first-time buyers.
The average loan size for first-home buyers rose $2,700 to $277,000 in the month, while the average loan size for all home buyers dropped $2,200 to $281,500 in the same period, the ABS said.
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