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Investors drive loan commitments to new high: ABS

New housing loan commitments rose to a record high of almost $33 billion, driven by a spike in investor lending to the highest level since 2015, new data has shown.

The Australian Bureau of Statistics’ (ABS) lending indicators figures for May 2021 has revealed that new home loan commitments rose by 4.9 per cent in May (seasonally adjusted) to a new high of $32.6 billion.

This was driven by investor housing loan commitments, which rose by 13.3 per cent during the month to $9.1 billion, which was the highest level since April 2015.

According to ABS head of finance and wealth Katherine Keenan, the value of investor loan commitments rose by 116.0 per cent in the year to May 2021, after falling to a 20-year low in May 2020 during the peak of the coronavirus pandemic crisis.

“Investor loans equated to 28 per cent of the total value of housing loan commitments in May 2021, compared to 46 per cent in 2015,” Ms Keenan said.

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“This reflects the very strong growth in owner-occupier loan commitments over the last year.”

The rise in investor lending commitments was concentrated in NSW (up 12.1 per cent) and Victoria (up 17.4 per cent) in May 2021, ABS statistics showed.

Owner-occupier lending grew by a more subdued 1.9 per cent over May to total $23.4 billion, but was up 88.4 per cent since last year.

Overall new home loan commitments rose by 95.4 per cent in the year to May 2021.

The value of new owner-occupier loan commitments rose by 3.8 per cent in NSW, 1.6 per cent in Victoria, and 6.1 per cent in Western Australia in seasonally adjusted terms in May.

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However, it fell by 4.5 per cent in Queensland and 3.6 per cent in South Australia.

According to the ABS, all states and territories that rose were driven by new loan commitments for the purchase of existing dwellings.

On the other hand, the value of loan commitments for the construction of new dwellings (down 2.3 per cent to $3.1 billion) fell for the third consecutive month.

FHB activity at record-high levels

The number of owner-occupier first home buyer (FHB) loan commitments fell by 0.8 per cent in seasonally adjusted terms in May, but has remained at record-high levels, particularly in NSW and Victoria.

Owner-occupier FHB loan commitments accounted for 32.7 per cent of all owner-occupier commitments (excluding refinancing) in original terms.

They accounted for 40.7 per cent of all commitments in Western Australia, 35.8 per cent in Victoria, 33.4 per cent in the Northern Territory, 30.7 per cent in Queensland, 29.3 per cent in NSW, 29.1 per cent in the ACT, 28.8 per cent in Tasmania, and 27.3 per cent in South Australia.

Ms Keenan observed that while FHB activity has remained at high levels in NSW and Victoria, it has fallen over the last few months in Queensland, Western Australia and South Australia.

She attributed this to the end of the HomeBuilder package and other state government initiatives such as the Building Bonus Grant in Western Australia.

The value of new variable rate loan commitments funded in May 2021 in original terms rose by 4.2 per cent, but fell by 4.8 per cent for FHBs (in original terms).

The value of new fixed rate loan commitments funded jumped by 11.8 per cent overall, and 3.9 per cent for FHBs (in original terms).

Fixed term personal finance rose by 5.6 per cent in May in seasonally adjusted terms, which the ABS attributed to lending for road vehicles which rose by 4.7 per cent, while personal investment lending rose by 11.6 per cent after rising by 25.2 per cent in April.

Constructions loans rose in 3 months to May: HIA

The Housing Industry Association’s (HIA) analysis of the ABS data has found that the number of loans for established homes increased by 10.3 per cent in the three months to May, to reach the third-highest level since the series began in 2002.

FHB activity was up by 63.7 per cent in the three months to May compared with the same time last year.

While noting that the number of loans for the construction of a new dwelling continued to fall in May, the HIA analysis showed strong growth in this segment across the states in the three months to May 2021.

The number of loans to owner-occupiers for the construction of a new dwelling in this period compared with the same time last year tripled in South Australia (up 181.6 per cent) and Western Australia (up 175.3 per cent), more than doubled in Tasmania (up 159.6 per cent) and the ACT (121.7 per cent), doubled in Queensland (up 106.5 per cent), almost doubled in Victoria (up 82.4 per cent), and increased in NSW (up 65.9 per cent) and the Northern Territory (up 65.8 per cent).

HIA economist Angela Lillicrap said that there is strength and confidence in the broader housing market, driven by low interest rates and ongoing house price growth.

She said: “The strength of the broader housing market is also drawing investors back to the market after being largely absent in 2020.”

“Low interest rates and strong house price growth will continue to support demand housing over the coming months,” Ms Lillicrap said.

[Related: Loan commitments continue record streak]

Investors drive loan commitments to new high: ABS
Investors drive loan commitments to new high: ABS
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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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