Lenders approved a record value of new home loans in November as first-home buyers took advantage of falling interest rates and government incentives.
Data released by the Australian Bureau of Statistics on Friday shows lenders approved a record $23.96 billion of new home loans in November.
That was 5.6 per cent higher than the previous record set in October, and a whopping 23.7 per cent higher than November 2019.
ABS head of finance and wealth Amanda Seneviratne said loans for existing dwellings were the main driver of the monthly surge in owner-occupier commitments – rising by 5.9 per cent over the month while construction loans rose by 5.6 per cent.
However, since July, the value of construction loans has risen by a whopping 75 per cent.
“This follows the implementation in June of the government’s HomeBuilder grant in response to COVID-19,” Ms Seneviratne said.
“Other federal and state government incentives and ongoing low interest rates also contributed to the continuing growth in new housing loan commitments.”
The Reserve Bank cut interest rates from 0.25 per cent to a record low of 0.1 per cent in November – fuelling a 0.8 per cent rise in national property prices that month and a 1 per cent rise in December.
Commonwealth Bank of Australia associate economist Nicolas Guesnon says we can expect more of the same over the next 12 months, not least because housing is one of the most interest-rate-sensitive parts of the economy.
“We think the strong flow of new lending will continue into 2021, supported by the combination of low borrowing rates and an improving labour market,” Mr Guesnon wrote in a research note.
“The government’s HomeBuilder grant will also support activity through 2021.
‘But we don’t think the dynamic of rising dwelling prices and new lending will pose financial stability risks for Australia’s household sector.”
Faced with rising vacancy rates, falling rents and weak population growth, investors have so far lagged behind owner-occupiers in the latest housing upswing.
Annual growth in owner-occupier home loans (31.4 per cent) has dwarfed annual growth in investor home loans (3.9 per cent).
But in a sign of growing confidence in the housing market and economy more broadly, lending to investors rose at a faster clip than lending to owner-occupiers this month, with the former rising by 6 per cent and the latter by 5.5 per cent.
The number of new loan commitments to first-home buyers, meanwhile, hit its highest level since October 2009, when the Rudd government tripled the first-time buyers grant.
“Record low rates are supercharging the amount people can borrow for a property and their chance of being approved for a loan,” said Sally Tindall, research director at RateCity.com.au.
“Government incentives such as the First Home Loan Deposit Scheme and the HomeBuilder program have also helped spur on significant increases in first home buyers and renovators.”