First home buyer confidence returns

Australian Property Market Outlook 15 October 2019

On 10 October, the Australian Bureau of Statistics (ABS) released its Lending to Households and Businesses data for August 2019.

At the same time, Master Builders Australia Chief Economist Shane Garrett released a statement declaring the First Home Buyer share of the home loan market has increased to its highest since early 2012 while investor lending has risen for the second consecutive month.

The takeaway from both is pretty simple: interest rates are down and the property market is looking up.

“ABS figures show that First Home Buyers accounted for 30.1% of owner occupier home loans during August 2019, the largest share since January 2012,” Garrett said.

“The substantial increase in the value of lending to housing investors during August is particularly encouraging. This segment of the market has lost the most ground over recent years. The robust 5.7% increase during August means that investor lending here is at its most elevated since November of last year,” he said.

HIA Economist, Tom Devitt is equally encouraged.

“We could be seeing the early signs of the positive impacts from recent policy stimulus with lending for both new and existing homes up for the month and the quarter,” Devitt stated.

“The decline in lending, which has been evident since late 2017, has started to reverse since the RBA started to cut interest rates in June.”

Lending to households building and purchasing new homes expanded by 1.1 per cent in the month of August and 0.4 per cent for the quarter. Lending for establishing dwellings also climbed by 0.6 per cent in the month and 4.4 per cent for the quarter.

Confidence climbing

The level of activity in the housing market is still short of past glories.

However, as you can see by the new home lending figures in the chart below, the trend is reversing.

There is still some way to go before lending reaches the lofty heights of a couple of years ago, but it is moving in the right direction.

According to Garrett, confidence is returning and that is the key to any revival.

“Confidence is the most crucial ingredient in any housing market and today’s figures, along with recent house price data, provide strong evidence that it is returning. With domestic demand in the economy so weak, government needs to take full advantage of the good news starting to come from our housing market and play its part in ensuring that the improving sentiment spreads to other areas of the economy.

“This can best be done by getting more economic activity happening on the ground through an accelerated roll out of infrastructure projects. This requires much better collaboration across all levels of government,” Garrett said.

First home buyers

Loans for new home construction rose by 0.3% with 2.7% increase in loans for the purchase of newly-built dwellings.

The value of lending to housing investors rose by 5.7% during August.

However, it seems confidence in the first home buyer sector is strengthening the most.

In the month of August there was a 5.2% increase in the number of loans to First Home Buyers (up to 7.6 per cent in the quarter), bringing their share of the owner occupier market to 30.1%.

It is the highest number of first home buyer loans since November 2017 and the highest share since 2012.

The current levels of stimulus, including RBA interest rate cuts (compare variable home loan interest rates here), APRA’s loosening of lending restrictions and income tax cuts – you can calculate your income tax here – look to be having the desired effect in reinvigorating the market and the confidence that drives it.

According to Devitt, if we factor in the lag between loan applications and final approval, the full effects of recent stimulus will soon be even more evident and could provide further support for the market.

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