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Investment properties and home construction rise seen in housing finance commitments

Trends in housing finance have been rising at a steep pace since late 2012, with a revival in the housing market and lower interest rates. All the media talk about Sydney property prices rising through the roof goes along with national statistics seen from the Australian Bureau of Statistics (ABS).

In its December 2013 release, ABS figures showed a rather straight trend upwards for the total value of financing commitments, but the number of commitments for owner-occupied dwellings is beginning to round off since mid-2013.

The trend of total value for investment housing rose 3.0% in December, compared to November, while owner-occupied dwellings went up by only 1.0%. This may indicate that the number of investors entering the market is rising, but it can also be due to the fact that investors could buy one or more homes, whereas the owner-occupier buyers will stop at one.

Investment Housing – value of commitments

investment housing value of commitments

 

 

 

 

 

 

Source: ABS

The monthly number of dwellings financed saw the biggest rise in the construction of new homes at 1.1%, which was negatively mirrored by the -1.1% change in the purchasing of new homes. This is good news for the housing construction industry, which has experienced rises in amount of new homes constructed since 2011, and recent ABS data also points to an increase in building approvals. That indicates more construction in the near future.

Investors can follow companies such as Stockland Corporation Ltd (ASX: SGP), Australand Property Group  (ASX: ALZ), Mirvac Group (ASX: MGR) and Lend Lease Group  (ASX: LLC) for home construction and commercial retail property development.

Construction of dwellings- number of commitments

construction of dwellings number of commitments

 

 

 

 

 

 

Source: ABS

News about increased interest and sales in the Gold Coast and Brisbane markets is being taken as a sign some investors are beginning to cast their net out further for lower prices and better yields than the Sydney market. Sale price ranges are at the lower end, with properties over $1 million still flat.

Foolish takeaway

You will see these movements at the beginning of a market uptrend. The bottom price ranges of properties get bought up first, disposing of stock on the market. Then, when it becomes harder to purchase lower priced homes, the median prices start to rise.

Buyers feel they need to pay more to secure a home, or because of lower interest rates, feel they can afford to increase their budget. This gets construction back into gear and the revenue of builders and developers begins to rise.

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