Home-loan value hits pre-GFC high

Despite COVID-19, signs are promising for both first-home buyers and investors

Home-loan value hits pre-GFC high

The value of home loans has hit a pre-Great Financial Crisis high despite the impacts of COVID-19, according to new figures from the Australian Bureau of Statistics.

The latest ABS data showed that the value of new loan commitments for housing grew for the fifth consecutive month in October, and the value of owner-occupier commitments hit record highs.

The sustained recovery in lending could be a major contributor to GDP in the December quarter for investors, owner-occupiers and first-home buyers, according to Adrian Kelly, president of the Real Estate Institute of Australia.

“The seasonally adjusted value of new loan commitments for owner-occupier housing rose 0.7% in October-September and 23.3% for the year, with rises seen in all states and territories except Victoria and the Australian Capital Territory,” Kelly said. “The increase in loan commitments reflects low interest rates, improved consumer sentiment about purchasing a home, particularly amongst first-home buyers, and response to HomeBuilder.”

Commitments for the construction of new dwellings rose 10.9%, and were the largest contributor to the rise in the month’s owner-occupier home loan commitments.

Kelly said that Victoria owner-occupier commitments, which bucked the trend, were a reflection of the severe impacts of the stage 4 lockdown on property activity.

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“Home loans for owner-occupiers fell 9.3%, reflecting decreased housing market activity in August and September due to the COVID-19 stage 4 lockdown in Melbourne and restrictions in regional Victoria, and is consistent with our feedback from agents on the ground,” he said.

Overall, however, the ABS’s October figures show promising signs for both first-home buyers and investors. The number of owner-occupier first-home buyer loan commitments rose 3.4% for the month, REIA said.

“This is a level more than 30% higher than any month since 2009,” Kelly said. That was when the then-Commonwealth government’s increase to the first-homeowner grant was temporarily tripled in response to the GFC.

“For investors, the value of loan commitments increased by 0.3% for the month and 2.8% for the year,” Kelly said. “On the back of yesterday’s GDP growth figures, this reflects the market response to the current conditions, and improved borrowing conditions points towards a stable property outlook for 2021.”