House prices and consumer confidence
Joe Hockey is relying on the unsustainable “wealth effect” of higher housing prices to encourage people to save less and spend more. Michael Pascoe comments.PT3M49S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-39rzl 620 349 June 9, 2014
Sometimes what isn’t there tells a story.
First home buyers housing loan approvals have disappeared from this month’s Reserve Bank chart pack.
Turns out the FHB statistics that have been grabbing headlines might not have been adding up.
Source: RBA chart pack March
It’s been a regular shock-horror story that FHB’s proportion of the housing market is running at or close to a record low.
The low proportion of FHBs looks a bit worse than it is, because the main reason it has fallen so far is that the rest of the market has taken off.
FHBs have stayed relatively constant – particularly if allowance is made for the big pull-forward effect when state and federal governments threw money at FHBs during the GFC.
Source: RBA chart pack June
That can be clearly seen in previous RBA chart packs, as shown in the accompanying graph, but it’s missing from the latest effort.
It seems doubts have been raised about just how reliable the Australian Bureau of Statistics' FHB count might really be.
A review of that particular statistic is underway and, in the meantime, it doesn’t make the RBA grade.
It has been suggested to me by a mortgage broker who should know, that the current system doesn’t necessarily capture who are first home buyers because it relies on picking up FHBs from those who qualify for one sort of state government assistance or another.
Those buying their first property beyond the price limit for a break on stamp duty may not be recorded.
If the quality of the figures aren’t good enough for the RBA, it will be interesting to see what the ABS comes up with tomorrow.
It’s a particularly important time for the figures to be right as consumer confidence is depending on housing like never before.
With Joe Hockey telling people that unemployment will rise and economic growth will slow, while wages growth dips below the inflation rate, the budget papers spelled out that Hockey is relying on the “wealth effect” of higher housing prices to encourage people to save less and spend more
No, that’s not really sustainable.