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.
All the larger states recorded increases in the value of new owner-occupier loan commitments.
Victoria recorded the largest increase, with new owner-occupier loans increasing compared to October by 19.6 per cent to $4.658 billion, reflecting an increase in buyer activity as COVID-19 restrictions were eased across the state. However, the amount of new owner-occupier loans in Victoria is down compared to the $4.7 billion recorded in August following the first easing of COVID-19 restrictions in the state. We can expect the number of new loan commitments to increase in Victoria in the next few months as the Victorian market continues to recover from the lockdowns.
Meanwhile, NSW recorded a record total of $6.058 billion in new owner-occupier loan commitments, a 1.7 per cent increase over October and continuing a surge that has seen record totals posted every month since August.
Queensland (up 2.18 per cent to $3.651 billion), Western Australia (up 0.51% to $1.976 billion) and Northern Territory (up 9 per cent to $109 million) all recorded increased in new owner-occupier loan commitments, while South Australia, Tasmania and the ACT recorded slight declines.
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.
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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WESTPAC TIPS 15PC RISE IN PROPERTY PRICES
Expectations on house prices have risen again despite a stumble in consumer sentiment caused by a spike in coronavirus cases in December.
The Westpac Melbourne Institute Index of House Price Expectations rose 1.1 per cent for January – a normally quiet month for property activity.
The rise in price expectations follows a 9.4 per cent surge in the same index last month to 143.7 – double the lows seen during the COVID lockdowns of April last year.
Westpac chief economist Bill Evans said there were clearly strong prospects for property prices, which the Reserve Bank of Australia has been monitoring.
LOW RATES INFLATE ASSET PRICES: RBA
Confidential analysis by the Reserve Bank of Australia suggests house values could jump 30 per cent over three years if borrowers believe the cut in interest rates is permanent.
The RBA is on alert for ultra-low borrowing costs inflating a credit-fuelled asset bubble and financial regulators are ready to act if necessary, but so far the central bank believes lending standards are prudent.
An internal RBA document released on Friday in response to a Freedom of Information request says the biggest risk to the economy was high unemployment, and that stronger household balance sheets from low rates could help counteract the danger.
MELBOURNE PROPERTY ENDS 2020 WITH A $900K BANG
For the first time, Metropolitan Melbourne house values have surpassed a median price of $900,000. It’s the largest year-on-year increase in median house price seen in the Victorian capital since 2020.
Data from the Real Estate Institute of Victoria’s (REIV) quarterly December report showed that the median value of Melbourne houses jumped by 9.5 per cent between the September and December quarters to land at $941,000.
According to the REIV, the lockdowns saw more households improving their homes throughout the year, which had a flow-on effect to property prices.
BRISBANE, ADELAIDE PRICES TIPPED TO GROW AS INVESTORS ZERO IN ON SMALLER CITIES
Brisbane, Adelaide and Perth are tipped to experience the strongest price growth this year, as 19 per cent of existing investors explore new purchases, an expert has said.
CoreLogic Research director Tim Lawless is forecasting a property price boost of between 7 per cent and 10 per cent in 2021, with the smaller capital cities tipped to benefit the most.
Brisbane, Adelaide and Perth are expected to post strong growth, while Sydney and Melbourne are set to trail behind, with buyers predicted to shun inner-city apartments and focus their attention on the suburban housing market instead.
DOUBLE-DIGIT PRICE GROWTH TO STICK AROUND AS ‘PROPERTY BOOM’ ARRIVES
According to leading indicators, Australia’s property boom officially began in November, following several slow months on the back of the COVID crisis, with double-digit price growth already logged across Australia.
Figures released by the Australian Bureau of Statistics last week revealed a surge in loan commitments for investor housing, with a 6 per cent monthly increase and 3.9 per cent yearly growth in November.
Overall, the ABS reported a record-high total value of new loan commitments for housing, with an extraordinary yearly growth of 23.7 per cent.
BRISBANE RENTS REACH RECORD HIGH IN DECEMBER QUARTER 2020: DOMAIN RENT REPORT
Unprecedented rates of interstate and overseas migration have sparked one of Brisbane’s strongest rental markets in a decade, with the city clocking record-high median prices that, in parts, are outstripping Melbourne.
Rental prices for houses rose by $10 to $425 a week during the December quarter, with units following close behind at $400 per week – up from $395 three months earlier, the latest Domain Rent Report shows.
It’s the city’s second consecutive quarterly price rise, and one that industry experts say could spell the end of Brisbane’s budget property era.