Australian Property News

Rise in number of $500K loans

Posted on Tuesday, July 27 2010 at 12:42 PM

The number of people taking loans of more than $500,000 to purchase property has risen by an average of 13 per cent nationwide during the past 12 months, according to leading mortgage broker Loan Market.

Loan Market chief operating officer Dean Rushton says the increase transpired in all mainland state capitals with the largest rise of 21 per cent occurring in Melbourne.

Analysis provided for Loan Market by PriceFinder found that the significant shift in loan size is only partially due to residential real estate price increases.

“A higher proportion of first homebuyer activity during 2009 due to the boosted government First Home Owner Grant and a more subdued top end market were factors which resulted in pushing people into higher home price and loan brackets,” Rushton says. “The Melbourne housing market experienced the biggest shift with a 21 per cent increase in people taking loans of more than $500,000 over the 12 months to July, 2010.”

The Brisbane region has had an 18 per cent increase in home loans of more than $500,000. Although there was a 16 per cent rise in Sydney, there was only a seven per cent shift in Adelaide and four per cent in Perth.

“Sydney has the lowest percentage of loans below $500,000 at 28 per cent while Adelaide has the highest at 66 per cent and appears to be one of Australia’s most affordable cities to buy a home,” Rushton says. “In Brisbane, 47 per cent of loans are below $500,000 compared to 65 per cent a year ago, while in Perth its 50 per cent and Melbourne 31 per cent. In Melbourne in July, 2009, 52 per cent of loans were below $500,000 so the change there reflects the strength of the property market in metropolitan Melbourne since early last year.”

Rushton says the six increases in official interest rates by the Reserve Bank of Australia (RBA) between October 2009 and May this year were mostly absorbed by the market.

“During the research period the cash rate dropped to a near 50-year low of three per cent so it took some time before the RBA’s increases started to subdue activity,” he says. “However the central bank should carefully consider the impact future rate rises may have on those who have increased their borrowings over the past 12 months.”