JASON'S UPDATE ON HOUSING FINANCE
Figures released by the Australian Bureau of Statistics (ABS) show that the volume of finance lent for the purchase of property during the September quarter was the highest quarterly growth rate on record. There was a 20% increase in housing finance during the September quarter compared with a 10.9% contraction in housing finance in the June quarter. The June quarter was impacted by the nationwide lockdown during March and April which saw open home inspections and on-site auctions banned, which resulted in a sharp decline in the number of transactions, with an obvious impact on the number of finance applications.
Not only did the September quarter show the largest quarterly increase in housing finance on record, but the $62.7 billion in finance was also the highest recorded since the March 2018 quarter and is just below the record amount recorded in the March 2017 quarter.
The increase in housing finance coincided with an easing of restrictions across the country, a loosening of lending restrictions and the lowest interest rates on record – all of which combined to encourage home buyers and investors to return to the market.
The biggest growth in housing finance occurred in Queensland, where the value of housing finance increased by 40.2% over the September quarter. The volume of finance loaned in Queensland supports the view that the Queensland markets and Brisbane, in particular, are enjoying increased demand for property and an upswing in property prices.
Despite the stage 3 and 4 lockdowns during July and August, Victoria saw a 4% uplift in housing finance, which bodes well for a bigger upswing in the December quarter following the easing of restrictions on open home inspections and on-site auctions across the state.
Owner-occupiers borrowed the greatest share of housing finance, with 52.6% of housing finance in the September quarter, followed by First Home Buyers at 22.7% and investors at 24.8%. While the number of investors is lower than the historical trend (around 37% of quarterly housing finance is normally secured by investors), there are strong indications that investor participation in the market will increase in 2021 prospects for capital growth across many markets improve, lending restrictions ease and interest rates remain at historical lows.
The high rates of housing finance in the September quarter show that consumer confidence returned quickly to the market following the nation-wide COVID-19 lockdowns. With low interest rates and eased lending restrictions making borrowing for a property easier it is likely that the December quarter will show similarly high rates of housing finance and suggests that market conditions will be right for a property boom across many markets in 2021.
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