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The latest lending figures from the Australian Bureau of Statistics have not been cause for celebration from the property industry, despite small gains in a number of sectors.
In February 2024, in seasonally adjusted terms, the value of new loan commitments for total housing rose 1.5 per cent to $26.4 billion, after a fall of 0.8 per cent in January. It was 13.3 per cent higher compared to a year ago.
Loans to owner-occupiers rose by 1.6 per cent to $16.9 billion and was 9.1 per cent higher compared to a year ago, while investor lending rose 1.2 per cent to $9.5 billion – a substantial 21.5 per cent higher compared to a year ago.
According to Leanne Pilkington, president of the Real Estate Institute of Australia (REIA), the latest lending figures for February do not reflect the true nature of what’s happening in the Australian property market.
The increases in lending to investors, for example, come after what she described as “an extremely low base”.
“The latest stats show the response of private investors to higher rents and anticipated cuts in interest rates,” she said.
But still, more investor activity would be welcomed by the national institute.
“Private investors continue to be part of the solution, not the problem,” Pilkington said.
Despite the appearance of more buyers in the market, REIA asserted that “housing affordability is at a crisis point as housing supply continues to be obliterated while housing and unit rental and capital prices across the nation are skyrocketing”.
Owner-occupier first home buyer loans recorded a rise, increasing 20.7 per cent over the course of the past 12 months, which Pilkington put down to government funding flowing into the market through first home buyer incentives.
“First home buyers are taking advantage of generous government subsidies at a time when rental properties are diminishing and the cost to buy is becoming comparable to renting,” she said.
Meanwhile, although the number of loans issued for the purchase or construction of a new home increased by 3.6 per cent in February compared to the previous month, the Housing Industry Association (HIA) noted that the overall trend was concerningly low.
“Despite this rise, lending to build and purchase a new home remained 3.6 per cent lower in the three months to February 2024 than at the same time last year,” remarked HIA chief economist, Tim Reardon.
“This is a deeper and more sustained downturn in lending for home building than any other period observed in the past 20 years,” he warned.
Reardon noted that new home sales and building approvals continued to signal an ongoing slowing in the volume of homes commencing construction, which he attributed largely to the challenge of accessing funding for hopeful home builders.
“The rise in the cash rate is the primary cause of this poor result in new home lending. Higher interest rates are compounding the impact of the rise in the cost of construction caused by elevated land, labour and material prices.
“This is further exacerbated by macroprudential rules that remain overly restrictive,” Reardon said.
He also pointed out that new home lending had fallen by more than a third in NSW and Victoria since interest rates first began rising in May 2022.
“The slowing in home building activity appears set to continue and will drag on economic growth through the rest of this year," he predicted.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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