Home loan 'new construction' strength may point to future price drops
The Australian Bureau of Statistics' finance statistics have seen strong results for 2014's first two months, particularly in comparison to the past five years. However, it may not mean that prices will continue to surge upwards.
Loan Market director, Mark De Martino, said that 13% more home loans were approved in the first two months of this year, than 2013, and that the results saw the highest total for January and February since 2009.
De Martino expected March and April may be in the running to set new records.
“The data released today by the ABS confirms that 2014 is off to a great start - home owners and buyers are returning to the market and they’re building momentum,” he said.
He also said that he expected March and April may be in the running to set new records.
“In the shortest month of the year there were only 227 fewer home loan approvals than the best month in 2013. Considering this, we should expect to see demand for finance growing and reaching new highs throughout 2014,” he said.
Meanwhile, the Housing Industry Association (HIA) were pointing to new home lending as showing encouraging signs.
HIA economist, Diwa Hopkins, said that owner occupier loans for the construction of new dwellings increased in Feburary by 0.8%, with the three months to February seeing a 7.2% uptick.
“This strong growth in housing finance is consistent with other leading indicators of the residential construction sector, including dwelling approvals and new home sales,” added Hopkins.
She also pointed to a strong uptick in the value of lending to investors for the purpose of constructing new dwellings for rent or resale.
"In the three months to February 2014, the value of this form of finance increased by 13.2%,” she said.
Commbank's Craig James also pointed to the value of loans to fund the construction of homes, which soared by 22.3% to a record $2.75 billion in February, however he also noted that consumer confidence is a mixed bag - rising in Western Australia and New South Wales, but falling in all other states.
"Anyone concerned about rising home prices need only look at the latest lending data for home construction. In February, loans to the tune of $2.75 billion were committed to fund home construction with the main driver being investors. In short, the supply of homes is set to rise to meet strong housing demand and as a consequence the growth of home prices will soften," said James.
