According to the Australian Bureau of Statistics’ Lending Indicators data for October 2020, the total value of new loan commitments for housing rose 0.7 per cent to $22.7 billion in October, in seasonally adjusted terms.
This is a 31.2 per cent increase from last year, ABS figures revealed.
The value of new owner-occupier home loan commitments rose 0.8 per cent to $17.4 billion in October, more than 30 per cent higher than October 2019.
The value of owner-occupier home loan commitments rose in all states and territories except Victoria and ACT.
Victorian owner-occupier home loan commitments fell 9.3 per cent in seasonally adjusted terms in October, which has been attributed to decreased housing market activity in August and September due to the imposition of stage 4 restrictions in Melbourne and stage 3 restrictions in the rest of Victoria to curtail the second wave of the coronavirus.
The value of commitments for existing dwellings for residential land fell in Victoria, which the ABS said was partly offset by rises in commitments for construction of new dwellings and for purchase of newly erected buildings.
ABS head of finance and wealth Amanda Seneviratne noted that commitments for the construction of new dwellings rose 10.9 per cent across the country, and was the largest driver of the rise in owner-occupier housing loan commitments.
“The value of construction loan commitments has risen by 65.6 per cent since July, which coincides with the June 2020 implementation of the government’s HomeBuilder grant in response to COVID-19,” Ms Seneviratne said.
“Feedback from lenders was that there has been a large increase in first home buyers applying for these construction loans over the last few months.”
The number of loans for the construction of a new dwelling increased by 11.5 per cent in October to 6,631, and represents an 82.8 per cent increase from this time last year.
The ABS data showed that the number of owner-occupier first home buyer loan commitments increased by 3.4 per cent in October (seasonally adjusted) to reach 13,481, which was 30 per cent more than in any pre-COVID-19 month since 2009 (when the first home owner grant was temporarily tripled as part of the government’s economic stimulus package in response to the global financial crisis).
The number of first home buyers also reached the highest number in over a decade, accounting for 42 per cent of the total number of owner-occupier loans issued in October.
The total value of loan commitments for investor housing was unchanged at $5.3 billion.
HomeBuilder popularity reflected in the figures
Assistant Treasurer Michael Sukkar noted the record-breaking data, stating that: “Today’s outcome is yet another endorsement of the effectiveness of HomeBuilder in protecting the jobs of the 1 million Australians in our construction sector and driving our comeback from the COVID-19 recession.”
“The construction industry has said the extension of HomeBuilder will mean a steady pipeline of construction activity through to 2022, which will keep tradies on the tools.”
Mortgage Choice CEO Susan Mitchell, welcomed the new figures, stating: “This remarkable result supports the mounting evidence we’ve seen in recent months that despite the challenges many Australians have faced this year, they are confident in the stability of property as an asset class.
“The ABS data demonstrates the critical role that fiscal support has played in shielding the nation’s housing market from the impacts of the economic downturn, with a large part of owner-occupier housing commitments being driven by the Government’s HomeBuilder Scheme.”
She added: "The record low cost of borrowing and unprecedented levels of government stimulus are helping young Australians get their foot on the property ladder. This is welcome news in what will go down in history as a very difficult year.”
Commenting on the data, and the role of the HomeBuilder scheme in driving up the figures, Housing Industry Association (HIA) economist Angela Lillicrap said: “This is the highest result since the Australian Bureau of Statistics (ABS) began reporting this data in 2002.
“HomeBuilder was the catalyst for improving consumer confidence in the housing market. The strength of housing finance data is also due to several factors, including low interest rates.”
Master Builders Australia CEO Denita Wawn echoed these sentiments, stating: “Work on all of these new home building projects is keeping the residential building industry very busy in the lead-up to Christmas and means that 2021 will get off to a very positive start,” she said.
“HomeBuilder is not only meeting its KPIs, but exceeding expectations.”
Ms Wawn added that the extension of the HomeBuilder scheme would result in a “steady pipeline” of new home building and major home renovations work in 2022.
“We will see more of the benefits from HomeBuilder coming over the next few months. This is good news for the businesses in the building supply chain and the people they employ. It is good news for the whole economy,” she said.
Speaking further about the ABS data, Ms Lillicrap noted that the number of loans for the purchase of land in the three months to October had also doubled compared with the same period last year.
“This improvement is broad-based and can be seen to varying degrees across all states and territories,” she said.
“We do not expect this to be the peak of the cycle. HIA New Home Sales data suggests that detached housing finance approvals will continue to be strong over the coming months. The extension of HomeBuilder will see strong results carry over into 2021.”
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.