South Australia’s housing market remains in the doldrums with January being the eighth successive month of decline in people seeking housing finance, according to Australian Bureau of Statistics data.

The number of South Australians seeking housing finance in January was 5.9 per cent down on the same period last year, compared to a rise in housing finance commitments elsewhere in the country which rose by 0.4 per cent.

The lack of confidence in the local housing sector was also demonstrated by data published by Mortgage Choice yesterday which showed that first home buyer participation in the market by South Australians in February was vastly out of kilter with the rest of the country.

Participation rates in Victoria and Queensland by first home buyers stood at 17 per cent respectively while Western Australia had the most active market with nearly 20 per cent of buyers being people venturing into the housing market for the first time.

By contrast, according to the Mortgage Choice data, only 4.7 per cent of South Australian buyers were first home buyers. The local participation rate was not far removed from the NSW experience (3.9 per cent) where soaring property prices have squeezed first home buyers from the market but the same explanation would not appear to apply in South Australia.

The South Australian Centre for Economic Studies (SACES) said the ABS housing finance data showed “South Australia’s total value of housing finance commitments for January 2015 increased by 0.2 per cent (up $2.0 million) over the previous month, valued at approximately $0.88 billion in trend terms”.

“Australia wide the value of housing finance commitments nation-wide increased by 0.8 per cent (up $133.0 million) to $17.7 billion. The total value of commitments for South Australia in January 2015 was 1.9 per cent higher than a year earlier, by comparison Australia wide commitments were up 6.9 per cent over the past year.”

SACES notes that “housing finance for investment purposes continues to grow significantly faster than for owner occupation. In trend terms, national financing for investment purposes in January 2015 was up 17.5 per cent compared to the corresponding month a year earlier, whereas investment for owner occupation increased by 6.9 per cent or less than half the increase in investment finance”.

“Across Australia investor housing finance represented a record high, 41.2 per cent of total housing finance for the month of January 2015, an investment of $12.4 billion. By comparison finance for owner occupier housing increased, albeit slightly, to $17.7 billion or 58.8 per cent of total housing finance.

“Investors favour new apartments in Sydney and Melbourne, both cities experiencing strong capital growth in apartment values over the past 18 months, with Sydney apartment values rising 15-20 per cent over the period.

“For savers deciding between investing in shares, superannuation or property February’s rate cut provides further incentives for investing in property – improved loan serviceability and prospects for strong capital growth. Investor confidence is likely to grow with the possibility of a further rate cut over the coming year.”