Solid April for New Home Loans
ABS housing finance figures show new home lending to owner-occupiers experienced solid growth in April.
The Housing Industry Association says the number of loans to owner-occupiers for dwelling construction increased 4.4%, while loans for the purchase of new homes rose 3.3%. Overall, new home lending saw growth of 4.0% compared to March, but was 5.9% lower than in April 2015.
“The official figures confirm that demand for new home purchase across Australia remains very strong,” says HIA Senior Economist Shane Garrett.
“Even though the amount of new home lending for owner-occupiers peaked over a year ago, current loan volumes remain elevated by historic standards. This means that activity on the ground over the remainder of 2016 will be healthy.”
He says the May interest rate reduction is likely to provide some impetus to new home lending over the coming months. HIA’s forecasts for new home building indicate that 2016 will be another strong year overall.
CBA to Cut Rates for Investors
Commonwealth Bank is cutting investment property interest rates and minimum loans on some mortgage products by more than 90%.
CBA, which writes one in four property loans, is cutting rates on its “extra home loan” and “extra investment home loan” products by 40 basis points to 4.24% and 4.51% respectively. The bank’s standard variable rate is 5.35%.
The loans – which can be principal & interest and interest only – are aimed at owner-occupied dwellings, investment housing, off the plan purchases and building & construction.
It is cutting the minimum loan amount on its top-up “extra home loan” product – which is aimed at retaining borrowers planning building or renovations – from $150,000 to $10,000.
It comes as around 160 home loan products – both owner-occupied and investor – slip below the benchmark 4%, encouraging property buyers to shop around for best rates.
“There is a mortgage war out there,” says Martin North principal of Digital Finance Analytics, a consultancy for major banks and finance service providers.
Stock Shortage Boosts Asking Prices
Asking prices for homes have risen in the past 12 months, driven by declining stock levels in some cities.
The average national median asking price for houses is up 6.4% increase on this time last year, according to SQM Research, while property listings around the nation are now 2.7% lower.
The asking price rises are likely to be a function of lower stock levels on the market, says SQM Research director Louis Christopher, who points to the dual event of the May rate cut and the lower propensity among vendors to put their homes on the market this close to a Federal Election.
“It’s possible the interest rate cut at the beginning of May may have led to an increase in buyer confidence, leading to higher absorption rates for listed properties,” Christopher says.
“Certainly, it seems that vendors were a little more confident during the month, with vendor asking prices rising across most cities.”
Melbourne’s median asking price for houses has risen 13.4% since this time last year, while listing prices for Canberra houses have risen 10.4%.
Networks Unite to Fight Labor Plans
Leaders from across the real estate industry have united to challenge Labor’s claim that changing negative gearing will improve housing affordability.
President of the Real Estate Institute of Australia, Neville Sanders, says Labor’s contention that affordability problems can be resolved by changing negative gearing and capital gains tax rules is “quite simply untrue”.
He says: “With increases in house prices in our two largest capital cities, there have been many claims that the current tax treatment of negative gearing and capital gains of residential property is exacerbating housing affordability issues. This is simply not the case.
“Supply is the critical factor in resolving the affordability problem. Changes to current taxation arrangements will do nothing to address affordability. If anything, they will exacerbate the problem.”
Sanders says there is ample research that shows that negative gearing and the CGT discount are not driving speculative investment in housing. Instead they are adding to housing supply, with currently $7 billion a year invested in new dwellings.
Raine & Horne Executive Chairman Angus Raine says cutting negative gearing will have the unfortunate effect of driving up rents, making it harder for tenants to save for a deposit to help them get off the rental treadmill.
FHBs Borrow 50% More Than 10yrs Ago
New analysis shows the average loan for a first-home buyer has increased 50% in the last 10 years. While it sounds a lot, it means the loan size has grown at a rate of only 4% per year since 2006.
A website set up to help aspiring property owners, First Home Buyers Australia, analysed Australian Bureau of Statistics data and found the average size of loans granted to first-home buyers increased from $221,100 to $330,600 in the past 10 years.
The state with the biggest increase was the Northern Territory, followed by Western Australia, Victoria, South Australia and NSW.