Housing trend points to southern gloom

Victorians are closing more mortgages than they’re opening.As policy-makers embrace the “structural change” from mining-led growth from yesteryear’s credit-led expansion, spare a thought for those states that do not participate directly in the mining boom.
Nanjing Night Net

Victoria is the prime example. Its economy is based around three industries that are under simultaneous pressure. The biggest is property. Second is manufacturing and third is finance.

Last Friday, Victorian Department of Sustainability & Environment (DSE) released transfer and mortgage data for May, which showed a continued paucity in the number of housing transfers and finance commitments, and ongoing weakness therefore for Victoria’s other two critical industries.

According to the DSE, the annual number of Victorian home transfers fell slightly over the month – from 172,706 in April 2012 to 172,524 in May – which is the lowest level reached in the series’ history and 12 per cent below average levels.

The DSE’s mortgage finance statistics are unique in that they provide data on both mortgage lodgements (i.e. new mortgages) and mortgage discharges (i.e. mortgages repaid in-full). Below is a chart showing both series on a rolling 12-month basis:

As you can see, mortgages discharged have risen above mortgages originated for three successive months and the gap is slowly widening.

According to the DSE, the annual number of mortgages discharged (192,534) actually exceeded the number of mortgage lodgements (191,602), meaning that 932 mortgages were lost in the state of Victoria in the 12 months to May.

To give you some perspective, this compares with the average of about 13,700 annual net mortgage creations since the series began in 2002:

Between 2003 and 2005, there were around 11 mortgages created for every 10 mortgages discharged. In the 12 months to May 2012, however, the number of mortgages lodged has slipped just below the number of mortgages discharged, signalling that Victorians are deleveraging.

So far, Victoria’s jobs market has held up under these strains. But overall, the weakness of the DSE data suggests the recent deflation of dwelling prices in Melbourne will continue.

With this weakness, combining with the pressure now being applied to Victoria’s manufacturing sector, the future looks difficult for the former dynamo.

Leith van Onselen is an economist who has previously held positions at the Australian and Victorian Treasury and Goldman Sachs. This is an extract from a longer report on Victorian housing available free at MacroBusiness. link: www.macrobusiness南京夜网.au

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