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Owner-occupiers drive housing finance bump: CoreLogic

Owner-occupiers and first home buyers have powered a rise in housing finance, while Queensland has taken the lead in housing finance growth, according to new data.

CoreLogic’s Property Pulse data revealed that the volume of finance secured for property purchase rebounded significantly in September.

This has followed the initial shock to housing demand in the first two months of the June quarter.

According to CoreLogic’s head of research Australia, Eliza Owen, the rebound was driven by eased social distancing restrictions across Australia in line with the declining number of coronavirus cases, in combination with “historically accommodative” monetary policy, which has resulted in record-low mortgage rates.

“As with the strong bounceback in many economic indicators over the September quarter, eased social distancing led to a rise in consumer sentiment and an increase in sales and listings volumes,” Ms Owen said.

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“CoreLogic estimates that sales volumes increased around 27. 7 per cent in the quarter, despite renewed restrictions across Victoria.”

Ms Owen quoted figures from the Australian Bureau of Statistics’ Lending Indicators figures for September, which showed that the volume of finance lent increased 5.9 per cent in September, taking the quarterly increase to 20.0 per cent, the highest quarterly growth rate on record.

This followed a 10.9 per cent contraction in the June quarter, which Ms Owen attributed to restrictions such as a ban on open home inspections and onsite auctions, which resulted in a sharp decline in transactions.

Housing finance for property purchase totalled $62.7 billion in the September quarter, the highest levels since the March 2018 quarter, and is just 6.6 per cent below the peak of the lending series in the three months to May 2017.

Owner-occupiers race ahead

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According to CoreLogic, an increase in secured finance (excluding refinancing) to owner-occupiers accounted for 85.6 per cent of the rise in money lent for purchasing property in the September quarter.

The owner-occupier first home buyer group had the highest rate of growth in secured finance, at 24.4 per cent in the quarter.

Changeover owner-occupiers recorded a rise of 23.1 per cent, while there was an 11.3 per cent rise in investors.

“It is worth making the distinction that while first home buyers had the fastest growth in lending over the quarter, the majority of secured finance (53.1 per cent) still went to ‘change over’ owner-occupier buyers, such as upsizers and downsizers,” Ms Owen said.

In contrast, investor participation in the housing market has been on the decline since a national property market downturn in 2017.

According to Ms Owen, the COVID-19 crisis has exacerbated this decline in investor participation and the rise of FHB participation.

This has been driven by a combination of the risk in investor-grade stock becoming elevated, and government stimulus targeting the construction of new homes and grants for FHBs.

“FHB purchases may be limited late next year, as temporary grants and concessions wind down, and house prices rise off the back of low mortgage rate settings,” Ms Owen said.

“In contrast, we could see a lift in investor participation as prospects for capital gains solidify, providing a further incentive for investors, along with more properties returning a positive cash flow thanks to such extremely low interest rates.”

Queensland leads housing finance growth

Queensland has accounted for most of the increase in lending for property purchases out of all the states and territories, with the value of housing finance commitments (excluding refinancing) increasing 40.2 per cent over the September quarter, comprising 31 per cent of the finance growth nationally.

NSW contributed 30 per cent to national growth, as it saw a 16.7 per cent increase.

Western Australia had the biggest increase in housing finance over the September quarter, rising over 55 per cent, corresponding with recent reports that the state and its capital, Perth are witnessing an upswing in dwelling markets following the impacts of COVID-19.

Even Victoria saw a 4 per cent rise in the value of finance for property purchases despite the extended restrictions on the transaction of property across the state.

According to Ms Owen, this was entirely driven by owner-occupier purchases.

However, finance secured for investment properties declined across Victoria by 4.3 per cent in September.

Projecting ahead, Ms Owen said: “In the near term, CoreLogic estimates lending for the purchase of property will continue to remain elevated due to loose monetary policy.

“However, the steep increases in finance seen in recent months is unlikely to maintain such a strong trajectory, and quarterly growth rates in housing finance volumes are likely to slow as pent-up demand runs out of steam.”

[Related: Refinancing up 27% so far this year]

Owner-occupiers drive housing finance bump: CoreLogic
Owner-occupiers drive housing finance bump: CoreLogic
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Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.

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