Flat quarterly figures reflect pre-rate-cut conditions and political uncertainty
Lending for new home purchases and construction remained largely unchanged during the first quarter of 2025, as political uncertainty ahead of the federal election appeared to weigh on consumer confidence.
According to the latest Lending Indicators data released by the Australian Bureau of Statistics (ABS), the volume of new housing loans showed little movement in early 2025. Despite the quarterly stagnation, lending volumes over the past 12 months showed signs of improvement. A total of 91,790 loans were issued in the year to March 2025 for new housing, marking an 8.5% increase compared to the previous year.
On a state-by-state basis, the Northern Territory posted the largest annual increase in new home lending, up 50.6%. South Australia (22.0%), Western Australia (20.1%) and Queensland (15.0%) also reported strong gains. More modest growth was seen in the ACT (6.2%), New South Wales (2.9%) and Victoria (0.9%), while Tasmania was the only state to record a decline, down 2.7%.
“Lending for the purchase or construction of new homes remained flat in the first quarter of 2025, likely the result of election uncertainty,” said Tom Devitt (pictured above), senior economist at the Housing Industry Association (HIA). “The data also reflected the situation prior to the effect of the RBA’s first interest rate cut.”
Investors have been leading the improvement in new home lending activity, with a 14.1% increase in loans over the last 12 months, compared to a 4.9% increase in owner occupier loans.
Devitt added that investor activity often rebounds first following a market downturn. “It is typical following a trough in housing activity that investors return to the market before confidence spreads to owner occupiers – and confidence is returning,” he said.
Positive economic conditions — such as robust population growth, low unemployment and rising household incomes — have also helped to support demand for housing finance.
Home renovation loans have also risen, climbing 3.9% year-on-year in the March quarter, the ABS figures showed. Compared to pre-pandemic levels in 2019, the volume of renovation lending is now over 33% higher.
Devitt, however, warned that political events can impact big-ticket purchases. “Elections can easily create consumer uncertainty around major spending decisions like new home purchases, especially elections where housing policy is front and centre,” he said.
Looking ahead, Devitt believes confidence may strengthen following the election outcome and in anticipation of further monetary easing.
“With the election behind us and the RBA expected to deliver this cycle’s second interest rate cut next week, more Australians are likely to return to the market and sign that contract for a new home build,” he said.
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