RECORD HOUSING FINANCE COMMITMENTS RECORDED IN NOVEMBER
The Australian Bureau of Statistics (ABS) has released the finance lending indicators for November 2020, which show that housing finance reached a historical record high. The value of new loan commitments for housing rose 5.6 per cent over October to a record total amount of $24 billion, a 23.7 per cent increase over November 2019.
Owner Occupier Finance
The value of new loan commitments for owner-occupier housing increased for both existing dwellings and newly constructed dwellings.
The total value of new commitments for owner-occupier home loans reached $18.3 billion in November 2020, which represented a month on month increase of 5.5 per cent and a significant 31.4 per cent increase over November 2019.
New Dwelling Loan Commitments
Loan commitments for the construction of new dwellings showed a monthly increase of 5.6 per cent to reach $3.10 billion, up by a total of 75 per cent since July. This upswing in commitments for new dwellings aligns with the Federal Government’s HomeBuilder Grant and is also supported by developers such as Stockland reporting record sales.
First Home Buyer Activity
The significant rise in finance for new construction loan commitments has also translated to increased first home buyer activity, with owner-occupier first home loan commitments recording a monthly increase of 3.1 per cent to reach a total of $5.70 billion over 13,904 new loans, a 42.5 per cent increase since the start of 2020. First home buyer activity represented 41.4 per cent of all new loan commitments for housing. The number of new loan commitments for investment purposes accounted for 4.1 per cent of all first home buyer activity.
The November result is the highest recorded for first home buyer loan commitments since October 2009 when similar rapid growth was recorded following the Federal Government’s temporary tripling of the first home buyer grant as part of its response to the global financial crisis.
The largest number of first home buyer loan commitments was recorded in Victoria, which saw a total of $3.772 billion, a monthly increase of 20.1 per cent. Queensland also saw an increase of 1.26 per cent to a total of $3.134 billion, but all other states and territories recorded a slight decline. This means that the massive month on month increase of first home buyer activity in Victoria was a large contributor to the national total.
Investor Loan Commitments
Meanwhile, new loan commitments to investors also showed an increase as interest rates decline, lending restrictions ease and market conditions improve across the country. Investor loans increased 6 per cent to reach $5.6 billion, an increase of 3.9 per cent compared to November 2019.
The largest amount of investment activity was in NSW, which recorded a monthly increase of 1.97 per cent for a total of $2.483 billion in new investment loan commitments. Meanwhile, Victoria posted the largest increase in investor activity with a monthly increase of 10.35 per cent to a total of $1.311 billion in new investment loan commitments.
Summary
The November data for new loan commitments for housing is a reflection of the improving consumer confidence in the Australian economy and is influenced by government incentives, very low interest rates and an easing of lending restrictions. The Victorian market showed the largest increases in monthly loan commitments as COVID-19 restrictions on real estate were eased and buyer activity resumed. However, NSW and Queensland also recorded strong increases in new loan commitments for housing finance and the other states and territories remained relatively stable.
The improving figures for investor loans indicate strong confidence in the fundamentals of the nation’s property markets and are a strong indicator that investors are returning to the market. The significant amount of first home buyer activity is driven largely by government incentives, supported by cheap access to finance. First home buyer activity will likely reduce as the HomeBuilder grant comes to an end, but should still remain relatively strong as finance will continue to be cheap and State Governments will continue to provide incentives to first home buyers.
The underlying indicators from the November results suggest that market conditions will be right for a property boom across most of the nation’s property markets in 2021.
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