The records keep coming. Commitments for housing finance reached a historical record high in November 2020, and this has been immediately followed by another record-breaking month in December. Statistics from the Australian Bureau of Statistics (ABS) show that the value of new loan commitments for housing rose 8.6 per cent over November to a record total amount of $26 billion, a massive 38.9 per cent year on year increase over December 2019. Finance commitments to first home buyers are also up and investors are returning to the market in droves.
Investor Loan Commitments
The statistic that most grabs the attention is that loan commitments for investor housing rose by 8.2 per cent to $6 billion, representing a 10.9 per cent increase over December 2019, and showing clearly that the rising markets across the country are enticing investors back into the market in bigger numbers. Many investors are moving to take advantage of interest rates declining, easier access to money and improving market conditions across the country.
The largest amount of investment activity was in NSW, which recorded a monthly increase of 5.9 per cent for a total of $2.629 billion in new investment loan commitments. Meanwhile, Victoria posted the largest increase in investor activity with a monthly increase of 15.94 per cent to a total of $1.520 billion in new investment loan commitments. South Australia was the other state to see an increase in investor activity, with investor loan commitments up by 8.97 per cent to $267 million. The other states and territories recorded slight declines, but the increased activity in NSW, Victoria and South Australia was sufficient to drive the increased investor activity.
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.
Owner Occupier Finance
The value of new loan commitments for owner-occupied housing increased for both existing dwellings and newly constructed dwellings.
The total value of new commitments for owner-occupier home loans reached $19.9 billion in December 2020, which represented a month on month increase of 8.7 per cent and a significant 38.9 per cent increase over December 2019.
All but two of the states and territories recorded increases in the value of new owner-occupier loan commitments.
Victoria once again recorded the largest increase, with new owner-occupier loans increasing compared to November by 10.1 per cent to $5.595 billion, reflecting an increase in buyer activity as COVID-19 restrictions were eased across the state following the state’s second lockdown. This figure surpasses the previous high point for the year of $4.7 billion recorded in August following the easing of COVID-19 restrictions in the state after the first lockdown. We can expect the number of new loan commitments to continue 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 $6.451 billion in new owner-occupier loan commitments, a 6.4 per cent increase over November and continuing a surge that has seen record totals posted every month since August.
Queensland (up 4.3 per cent to $3.809 billion), Western Australia (up 10.7 per cent to $2.187 billion), Tasmania (up 11.6 per cent to $307 million) and the Australian Capital Territory (up 16.6 per cent to $490 million) all recorded increases in new owner-occupier loan commitments, while South Australia and the Northern Territory recorded slight declines.
New dwelling loan commitments
Loan commitments for the construction of new dwellings showed a monthly increase of 17.1 per cent to reach $3.52 billion, up by an astonishing 119 per cent compared to December 2019. 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
First home buyer activity continues to surge, with a further significant rise in owner-occupier first home loan commitments recording a monthly increase of 14.1 per cent to reach a total of $6.50 billion over 14,205 new loans, a 60.6 per cent increase compared with December 2019. First home buyer activity represented 35.9 per cent of all new loan commitments for owner-occupied housing. The number of new loan commitments for investment purposes accounted for 4.2 per cent of all first home buyer activity.
The December 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 $4.739 billion, a monthly increase of 25.6 per cent. NSW (up 10.8 per cent to $3.442 billion), Queensland (up 4.7 per cent to $3.282 billion), Western Australia (up 11.6 per cent to $2.211 billion), Tasmania (up 5.3 per cent to $256 million), South Australia (up 8.11 per cent to $866 million), and the Australian Capital Territory (up 43.9 per cent to $334 million) all recorded increases in new first home buyer loan commitments, while the Northern Territory recorded a slight decline.
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.
Another month and another record. The November data for new loan commitments was already a record. The December figures show that the ceiling for new home loan commitments hasn’t yet been reached and is a continuing reflection of improving consumer confidence in the Australian economy. The activity across all the home loan finance sectors 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 real estate activity in the state surges following the easing of COVID-19 restrictions. However, NSW and Queensland also recorded strong increases in new loan commitments for housing finance and the other states and territories also showed positive results.
The underlying indicators from the December 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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COMMBANK: HOUSE PRICES TO BOOM BY 16% IN NEXT TWO YEARS
Commonwealth Bank (CBA) forecasts dwelling prices will rise 8% in 2021 and 6% in 2022, with house prices to rise 16% in that time and unit prices by 9%, evidencing the disparity in the sectors.
CBA Head of Australian Economics, Gareth Aird, said surging momentum in the property market and leading indicators pointed to strong price rises.
“New lending has lifted sharply. Dwelling prices are rising briskly in most capital cities. And turnover is up significantly on year ago levels,” Mr Aird said.
“Near term indicators of momentum suggest conditions will further strengthen. Auction clearance rates are sitting at levels consistent with double-digit dwelling price growth.
“And both the CBA home buying measure in our Household Spending Intentions series and the house price expectations index from the WBC/MI Consumer Sentiment survey have surged.”
MELBOURNE AUCTIONS: HUNDREDS OF SALES MOVE ONLINE WITH BUYERS, VENDORS UNWILLING TO WAIT AMID LOCKDOWN
Melbourne’s property market has shrugged off the challenge of a temporary ban on in-person auctions, with a strong clearance rate and a $10 million-plus sale price under the virtual hammer.
In scenes far removed from the near-complete halt in activity last year during lockdowns, agents reported keen buyer interest in online auctions – and some even brought forward auctions to Friday night to beat the five-day ban because of the snap lockdown.
Saturday’s clearance rate was 75.4 per cent. There were 698 auctions scheduled – agents reported results from 439 results, 180 of which sold prior, and 92 were withdrawn. Twelve of 17 auctions brought forward to Friday sold in-person.
RENTS IN AUSTRALIA ARE RISING AGAIN, WITH TENANTS IN SOME CITIES PAYING UP TO 12% MORE THIS YEAR
Almost 12 months after it began, rental markets appears to have largely shaken off the ill-effects of the pandemic for now.
According to property investment house SQM Research, the national vacancy rate is now 2%, below the pre-pandemic level of 2.1%, as capital city markets around the country continue to tighten.
That’s despite the largest two, Melbourne and Sydney, remaining at elevated levels as both continue to bear the brunt of paused immigration and international students inflows.