Record housing finance data sparks affordability fears

Investment lending has risen to its highest point in four years as housing finance overall hit another all-time high, sparking concerns over affordability and a possible housing bubble.

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Red hot housing markets across the country are raising affordability fears, but most particularly in Sydney and Melbourne. Photo: Shutterstock (Image source:

Investment lending has risen to its highest point in four years as housing finance overall hit another all-time high, sparking concerns over affordability and a possible housing bubble. 

Data from the Australian Bureau of Statistics showed the total value of new home loans hit $28.75 billion in January, a 44 per cent increase on the same time last year.

Owner occupier loans rose to a record of $22.11 billion, while investor loans hit $6.64 billion in the month - 9.4 per cent up on January and 22.7 per cent up on the same time in 2020.

The rise in investor lending, which was the eighth consecutive month of increases, was the largest surge since September 2016.

Canstar group executive financial services, Steve Mickenbecker, said the data indicated home lending hadn’t been impacted by recent COVID-related lockdowns across the country, while the end of home loan repayment pauses and the wind up of JobKeeper could turn out to be more of a “gentle breeze than a headwind”.

“Property prices are booming in a market under-supplied with listings through 2020 and into the early months of 2021, as buyers snap up new offerings. New listings will need to recover if property price growth is to slow,” Mr Mickenbecker said. 

“The tried and true mix of government incentives and low interest rates has continued to be  proven successful as first home buyers and home builders continue to rush into the market.”

Real Estate Institute of Australia president Adrian Kelly said affordability could become an issue if the current trajectory was continued throughout 2021.

“The increased activity by investors, first homebuyers and owner occupiers in the market shown in the January lending figures is impacting on prices and affordability,” Mr Kelly said. research director Sally Tindall said the historically low interest rates on offer had significantly boosted the amount that people could borrow, resulting in homebuyers stretching their budgets for properties they previously might not have been able to afford.

Ms Tindall said government incentives and the fear of missing out had also driven the burst of lending activity.

ABS data showed the number of first homebuyers in the market was up 70 per cent from the same time last year.

“While it’s great to see first home buyers finally get the keys to their new home, when bidding at auction people need to be careful about how much debt they take on,” Ms Tindall said. 

“It’s crazy to think the government is still pushing ahead with the scaling back of responsible lending obligations at a time when the property market is going through the roof. 

“With house prices expected to rise this year, and pressure on buyers to overcommit themselves in fear of missing out, responsible lending laws are now more important than ever.” 

The lending data follows superannuation providers sounding off warnings over a proposal to allow first homebuyers to dip into their super for a house deposit, saying it could drive up capital city median house prices by between 8 per cent and 16 per cent. 

Industry Super Australia chief executive Bernie Dean said allowing for borrowers to put superannuation savings into a housing deposit would be like throwing petrol on a bonfire. 

“It will jack up prices, inflate young people’s mortgages and add billions to the aged pension, which taxpayers will have to pay for. 

“Politicians who own multiple investment properties and pocket 15 per cent super might think price hikes are a ‘secondary’ consideration. 

“They don’t care about locking young people into hugely inflated mortgages and a bleak future with hardly any savings to fall back on.”

Current market conditions have resulted in swirling speculation over the possibility of a housing bubble forming, as CoreLogic data shows median house prices are continuing to rise to record highs across all markets.

Economists and experts surveyed by Finder said they expected property prices to jump by 12 per cent, on average, over the next two years, with first time buyers who had saved a deposit urged to pounce sooner rather than later.

Those experts said for a bubble to form in the market, property prices would have to increase by at least 23 per cent, on average, over the next 24 months.

Real Estate Institute of New South Wales chief executive Tim McKibbin was similarly unconvinced that a housing bubble was forming.

“The talk of a housing bubble has predictably grown louder in recent weeks, so some perspective on the bubble theory is needed,” Mr McKibbin said.

“When demand is strong and supply is constrained, a market is buoyant.

“This is where the NSW residential market sits at this stage in the cycle, with nothing to suggest a bubble is on the horizon.

“Let’s not forget that, pre-COVID, the housing market was in a relatively steady state, having weathered the type of mild correction which is a natural reality of any cycle.

“The bubbleists missed the mark then and the signs suggest they’ll be wide of the mark this time too.”

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