“Move-up buyers” driving mortgage growth

by Miklos Bolza12 Jan 2017
Australian annualised dwelling finance by loan values increased by 10% year-on-year by last October – a trend which is mainly pushed by higher numbers of “move-up buyers”.
Deutsche Bank’s Australian Housing Update, defines move-up buyers as non-first home buyers minus investors. For this group, the annualised home loan value increased by 9.7% from October 2015 to October 2016.
In contrast, annualised home loan values for first home buyers and investors both decreased by 1.8% and 12.2% respectively during the same time period.
“Any increase in move-up buyers (and fall in investors) could be explained by tighter or more stringent lending standard for investors vs owner occupiers, increased interest rates or that investors have simply decided to shift away from Australian property to other asset classes as an investment,” a Deutsche Bank analyst told Australian Broker.
Broken down by state, the value of investor loans declined across NSW, Victoria, Queensland, South Australia and Western Australia. On the other hand, the value of FHB loans decreased in NSW and WA and increased in QLD, SA and WA. For move-up buyers, values increased in all states except WA.
Affordability at risk
The Deutsche Bank report also examined housing affordability across Australia and found that mortgage payments as a percentage of income sat at 17% – the overall historical average.
To calculate this, researchers used the standard variable indicator rate provided by the Reserve Bank of Australia (RBA).
“While this is not perfect to use state income, city house prices, or standard rate (as it creates the perception of decreased affordability) it is the closest we can achieve with available data. It also enables us to get a useful trend in affordability across capital cities,” the analyst said.
Further breaking this down by looking at disposable income, the bank found that the average weekly mortgage interest payments as part of the average weekly income for each capital city as of the September quarter 2016 were as follows:
  • Sydney (63.6%)
  • Melbourne (45.8%)
  • Brisbane (31.3%)
  • Perth (27.3%)
Related stories:
Rising rates could squash national housing boom
Deposits now 1.4 times the average Australian household income
“Benign” property growth expected for 2017