Tony Alexander

Economic Commentaries

Weekly Overview June 16 2016

Thursday June 16th 2016

This week I am at Fieldays so start the Overview with a few observations on the mood at Australasia’s biggest agricultural gathering. I also take a look again at the housing market, focussing in on two things. Firstly a list of structural changes helping to explain the apparent downward trend in home ownership. Second the data suggesting near 40% of house sales in our three biggest cities are to investors.

We are invited to adopt a view that investors are snatching up everything. Not so. Given the tendency to flick properties on quickly there is an upward bias to the investment proportion of house sales. The same goes for mortgage lending. Quickly sold properties have their debt repaid quickly and new borrowing massively biases upward the proportion of a year’s lending counted as being for investment purchases.

It pays to note that while total new mortgage lending since September 2014 has totalled $118bn, the actual stock of debt as at March 2016 was only 12.4% or $24bn higher than in September 2014. Debt repayments during the period totalled $115bn! The difference is largely interest charges. The Reserve Bank in fact has no published data showing changes in the proportion of the mortgage debt owed by investors. None. That is very disappointing because it prevents informed debate and provides space for the same old incorrect housing collapse stories which bad forecasters have been peddling for years now. Pity those who listened to them.