Owner-occupier lending reaches six-year high as ABS December data robust

Owner-occupier lending reaches six-year high as ABS December data robust
Owner-occupier lending reaches six-year high as ABS December data robust

Australian housing finance approvals firmed in December, with the monthly volume of new home loans to owner-occupiers hitting a six-year high, according to latest ABS data, indicating that the pipeline of new home building was likely to remain strong during early 2016.

The number of owner-occupier loans for new homes rose by 1.8 percent in December, with a growth of 12.4 percent in loans for newly-constructed homes. 

Compared with a year earlier, total owner-occupier loans for the construction and purchase of new dwellings are 5.3 percent higher.

The ABS data showed 58,552 home loans were approved in December, up 2.6% from November, with the value of new home loans taken by property buyers rising 0.8% to $33.5 billion. 

“December’s new home lending figures are the best we’ve seen since November 2009, when a major government stimulus was underway,” noted Housing Industry Association senior economist Shane Garrett.

Mortgage Choice chief executive officer John Flavell said the last time more than 58,500 home loans were approved in one month was back in January 2008, and was a testament to the strength of the property market.

“The data shows that all parts of the market improved over the month of December. The number of dwelling commitments approved for the construction of new dwellings was up 1.8%, while the number of loans written for the purchase of new dwellings and the purchase of established dwellings was up by 12.4% and 2.1% respectively,” he said.

The number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 15.1% in December 2015, off an 11-year low of 14.9% in November 2015.

A rise in the proportion of first-time home buyers in the market in December as well as a jump in home loans being taken out by owner occupiers could indicate housing is becoming more affordable given softer conditions in property markets, said Amanda Watt, the head of banking business act.

“Reflecting greater home loan affordability, the average loan size for first home buyers dropped $6,400 to $348,100 between November and December while the average loan size for all owner occupied housing commitments fell $8,500 to $377,600. This drop in loan size has coincided with a slowing in property markets in most capital cities as indicated by falling auction clearance rates and, in some cases, falling median house prices," said Watt.  

The value of home loans taken by investors rose 0.6% to $11.6 billion, stabilising from a 19% drop between April and October but still down 13.6% on a yearly basis, noted Matthew Hassan in a post on Westpac’s website. 

Changes in lending criteria and borrowing rates for investor loans is indirectly boosting owner-occupier activity – although the bulk of the initial ‘switching’ effect seemed to come through between June and September, he added.

“So money continues to pour into property and much of it has recently come from owner occupiers following stricter prudential regulations on home loans given to investors. The data also reveals the staggering size of Australia's home loan industry. In December 2015, the value of outstanding home loans funded by banks and other authorised deposit-taking institutions totalled a record $1.46 trillion, made up of $931 billion in home loans to owner occupiers and another $528 billion to investors,” said Watt.

But while it was pleasing to see a spike in both the value and number of home loans written over the month of December, Mortgage Choice’s Flavell said the sudden surge in activity wasn’t altogether surprising.

“At Mortgage Choice, we know from our own data that December is a traditionally hot month in terms of home loan settlements, as Australians are keen to finalise their property plans before the New Year commences,” he said.

Moving forward, Flavell said he was confident that the property market would remain robust over the coming months.

During December 2015, the number of new home loans increased, in annual terms, most strongly in the Northern Territory (+29.3 percent), followed by New South Wales (+21.7 percent) and Victoria (+12.3 percent). New home lending volumes also rose in Queensland by4.0 percent, Lending volumes fell in Tasmania (-29.6 percent), Western Australia (-19.8 percent) and the Australian Capital Territory (-0.5 percent).

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