NAB: Housing Finance posts another small gain in November

Housing Finance posts another small gain in November

Owner-occupied housing demand continues to steadily improve, recording the eighth consecutive rise in volumes in November. Total values also rose, the 6th increase in the past 8 months. But overall activity in the loans market remains weak, with total finance approvals running at $20.3bn, still $3bn off their mid-2009 peak. While owner-occupied approvals have been trending higher, investor approvals have been essentially been flat for the past year. Lower interest rates will support further gains in finance approvals in the short-term, but gains will be limited amid soft consumer confidence and weak housing demand.

The headline number of commitments for owner occupied housing loans rose by 1.4% in November (market median and NAB forecast 1.0%; October +0.8%), the eighth consecutive rise. The November gain in owner-occupied commitments was due to a 2.0% rise in finance for new dwellings, and a 1.6% rise in established dwellings, while finance for construction fell 0.4%. First-home buyers continue to drift back into the market, representing 20% of all dwelling commitments, the highest % since January 2010.

The value of new loans (owner-occupied and investor) approved rose by 2.1%, after falling 2.0% in October. Owner-occupied values rose 2.2% and investor approvals rose 1.8%. Investor approvals have risen in 4 of the past 5 months, so some evidence that investor demand is starting to improve after a very weak first half of 2011.

The anticipation of RBA rate cuts in late 2011 helped demand for home loans late last year, and the expectation of further cuts should further support activity in early 2012. But with the house price outlook still quite soft in many parts of the country, gains will be limited and levels will remain well below the peaks of 2009.

This document has been prepared by National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 ("NAB"). Any advice contained in this document has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice in this document, NAB recommends that you consider whether the advice is appropriate for your circumstances. NAB recommends that you obtain and consider the relevant Product Disclosure Statement or other disclosure document, before making any decision about a product including whether to acquire or to continue to hold it.