House prices? Let me google that for you

The credit squeeze in property is having an impact – and the worst isn’t over yet. Housing finance approvals fell sharply in June, led by the investor segment, although finance for owner occupiers is also slowing - and now negative in annual terms. 

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This tightening in credit is having a flow-through impact on house prices. These are falling in annual terms for Australia as a whole, with Sydney the weakest market but Melbourne rapidly catching up. 

"ANZ’s new Housing Search Index suggests house prices may stabilise later in calendar 2018.”

Is there light at the end of the tunnel? New ANZ Research says perhaps – and the conclusion comes from an unusual place.

ANZ Research expects credit conditions to tighten further over this year and as a result to see further weakness in house prices and building approvals.

The fall in value of housing finance commitments in June more than offset the slight rebound seen in May. In annual terms housing finance is now 8.4 per cent lower than the previous corresponding period, the weakest annual result since April 2016.

The investor segment continues to drive the weakness as tighter credit conditions hit this segment the hardest. The value of investor finance fell a sharp 2.7 per cent in June and is now 18.1 per cent weaker than the same time in 2017.

The value of housing finance for owner occupiers fell by 0.2 per cent in June following a surprise bounce the previous month. Owner occupier finance has now fallen for three of the past four months and is lower in annual terms for the first time since November 2016.

Credit tightening is impacting this segment - albeit much less sharply than the investor segment.


The ANZ Housing Search Index is a new gauge for dwelling prices in Australia, constructed using data from Google searches.

The index involves three steps:

  • collating Google search trends in Australia since 2004 for topics one would be most likely to search for when buying a property (terms like ‘stamp duty’, ‘mortgage loan comparison’, ‘auctions today’, ‘moving company’, etc);
  • standardising each index and aggregating the results into a simple sum; and
  • seasonally adjusting the data and - due to the volatility of the underlying time series - taking a trend series.

The index is able to track the quarterly change in Australian dwelling prices with some precision and with the added benefit of a three-month lead.

A signal

The good news? ANZ’s new Housing Search Index suggests house prices may stabilise later in calendar 2018, consistent with the message sent by auction clearance rates.

It is early days, however, so ANZ Research is not getting too carried away with the signal.

Google Trends, available since January 2004, provides daily and weekly reports on the volume of queries related to various industries.

Significant research has shown this data may correlate with the levels of economic activity in given industries, and thus may be helpful in predicting macro indicators.

The rationale behind the ANZ Research approach is Google searches are able to gauge ‘collective wisdom’, revealing sentiment towards a given market, such as housing.

For example, a surge in searches on the topic of stamp duties’ may indicate interest for buying a property is heating up, and so presage a rise in house prices.

The year on year change in the index can track annual shifts in housing prices, three months in advance.

The Index has been slowing throughout 2018 but more recently has ticked higher – suggesting a jump in interest in house buying and hinting near-term stabilisation in prices may be on the cards.

The very recent stabilisation of the auction clearance rate is consistent with our search indicator. In both cases, the sign of improvement is at a very early stage so we are cautious about over-interpretation. Still, these are encouraging early signs.

Jo Masters is a Senior Economist, Giulia Lavinia Specchia is an FX Strategist and David Plank is Head of Australian Economics at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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