Housing demand to move home values and mortgage loans higher
21/04/2012 
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More than 63,300 people took a home home loan in March
Owner occupied loans totalled $20.82bn
Strong housing demand will boost house prices
More than 63,300 Australians secured a home home loan in March, the highest level in eight months, with stronger demand for housing expected to boost house prices.
Financial markets are now pricing in another interest rate rise with last year’s hikes having little impact on borrowing.
Housing loans for owner-occupiers grew a seasonally adjusted 1.3 per cent in March, a fourth consecutive month of growth, data released today by the Australian Bureau of Statistics shows.
Economists had expected home loan commitments to rise 1.5 per cent in March.
The value of owner-occupied was $20.82 billion in March, down 0.4 per cent on the previous month.
“This rising demand for established properties will place upward pressure on house prices,” said Westpac senior economist Andrew Hanlan .
“Notable, is the consistency of house price gains across most capitals, supported by rising household incomes,” he said.
Average house prices grew by an average 1.1 per cent across Australia in the first three months of the year, according to the Australian Bureau of Statistics’s House Price Index, which takes the average of the nation’s eight capital cities. Over the year, house prices jumped 8.6 per cent , with strong gains across most cities and modest growth in Sydney.
Upswing in housing
Mr Hanlan said the data signalled the beginning of an upswing in housing demand.
“The interest rate rises of 2007 have lost their sting,” he said.
Mr Hanlan said lending to owner-occupiers, after stripping out refinancing, had rebounded 6 per cent over the past four months and was now 1 per cent above the high of last June.
“Interest rate settings do not appear to be overly tight and households are enjoying strong income growth, job security and rising wealth,” he said.
“All of this, plus an undersupply of housing, points to a lift in housing finance.”
Financial markets are pricing in a high risk of an interest rate rise by the end of the year in the wake of last week’s strong labour force report, which showed the unemployment rate had fallen to its lowest level since November 1974 at 4.4 per cent.
Rise across Australia
Demand for home loans in the nation’s two territories led the way in March.
Owner occupier home loan commitments jumped 17.7 per cent in the ACT in March, building on the 9.7 per cent increase in February, while they rose 9.6 per cent in the Northern Territory, reversing the 7.6 drop in the previous month.
Among the states, home loans in Queensland rose 1.5 per cent in March, in Western Australia they increased 1.2 per cent and in NSW they were up 0.5 per cent.
This was the third monthly increase in a row in NSW, Australia’s largest housing market.
However, the pace of growth fell 1.5 per cent in both South Australia and Tasmania, while loan commitments in Victoria declined 0.4 per cent.
AAP
Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers.
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