Housing finance dips but investor, trade-up loans rise

Trade up buyers are making their presence felt in property markets, according to new housing finance figures, while investors are concentrating their activity on COVID-free states.

The total value of new loans decreased slightly in September, falling 1.4 per cent from the previous month to $30.31 billion.

Around 30 per cent of those loans went to trade-up buyers, while the value of new loans to first homebuyers fell for the eighth consecutive month, notching a 5.6 per cent reduction in September.

The value of owner-occupier loans fell by 2.7 per cent to $20.7 billion, with the biggest reductions occurring in Victoria, at 12.7 per cent.

Investor loan commitments, however, increased across most states, rising by 16.4 per cent in South Australia, 7.3 per cent in Western Australia and 4.2 per cent in Queensland. 

Real Estate Institute of Australia president Adrian Kelly said the data demonstrated rising affordability issues in many Australian markets.

Mr Kelly said housing affordability had been on a steady decline for the past 20 years and would continue to worsen if inflation rose as household incomes stagnate.

REIA research showed the value of the average home loan had skyrocketed in Australia over the past two decades, rising from $150,271 to $500,219.

In September, average loan sizes continued their upwards trend even as the total value of loans dipped slightly.

“New South Wales recorded the largest rise, reaching a record high of $750,000,” Mr Kelly said.

Canstar Group financial services executive Steve Mickenbecker said it was clear that first homebuyers had been priced out of the market.

“They were early out of the blocks after the first round of lockdowns, but have been flat over the last 12 months and not even keeping pace with property price increases,” Mr Mickenbecker said.

“Investors have followed an inverse path to first home buyers with negative growth in the value of new loans in 2020, followed by close to doubling of lending values in the last 12 months. 

“The strength of the investor market amazes and shows their faith in the price outlook for property, with the number of new loans up from 11,608 in September last year to 18,635 in September this year and the value of loans to investors over the same period up 83 percent.

“The value of refinancing to a new lender is down from August by 9 percent, which is surprising when fixed rates for terms beyond one year are increasing.  

“Borrowers should be anticipating the end of falling rates and looking to get ahead while the going is good.”

Bluestone Home Loans consultant economist Andrew Wilson said he expected a rebound in lending activity in coming months, with pent-up demand from formerly locked down states in NSW and Victoria expected to drive a surge of activity.

However, Dr Wilson said the possibility of further lending restrictions could tighten the market for new borrowers.

“The prospect of further actions from APRA reflecting concerns over continued strong housing market conditions and rising prices may act to bring forward demand from home buyers looking to avoid possible future higher lending costs,” Dr Wilson said.