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Housing affordability declines as investors flock to COVID-free states

New loan commitments for housing have fallen, particularly in COVID-ravaged states, as affordability continues to decline.

The value of new loan commitments fell 1.4 per cent in September 2021, driven by a 2.7 per cent fall in new owner-occupier loan commitments, according to newly released statistics from the Australian Bureau of Statistics (ABS).

In COVID-hit Victoria, the drop in value of owner-occupier lending was a massive 12.7 per cent.

Real Estate Institute of Australia (REIA) President, Adrian Kelly, said while new loan commitments to owner-occupiers fell, investors had increased their interest in COVID-free states.

“The figures show the number of new loan commitments to first home buyers saw its eighth consecutive fall, down to 5.6 per cent in September 2021 with the number 11.4 per cent lower than the previous year,” Mr Kelly said.

“Victoria saw a drop of 12.7 per cent in the value of owner-occupier lending due to its sixth extended lockdown but saw a slight rise of 1.4 per cent to investors,” he said.

Mr Kelly said housing affordability had been on the decline for the past 20 years and would continue to be an issue if inflation rose and household income failed to increase.

REIA’s Housing Affordability Report: the past 20 years, showed that access to the market had been particularly difficult for first home buyers.

Coinciding with this, the average home loan had skyrocketed, inflating from $150,271 to $500,219 over the past two decades, and this number continues to rise.

Mr Kelly said the ABS found the average loan size for owner-occupier dwellings (construction, purchase of new dwellings and existing dwellings) rose slightly at the national level and across most states.

“New South Wales recorded the largest rise, reaching a record high of $750,000,” he said.

According to the ABS, the value of new loan commitments for owner-occupier housing fell for the fourth month in a row, to $20.7 billion in September, however this was 21 per cent higher compared to a year ago and 49 per cent higher than pre-COVID levels in February 2020.

Mr Kelly said investors were back with figures showing they increased their commitment levels across Australia, with South Australia seeing the highest rise of 16.4 per cent. 

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Nicole Madigan

Nicole Madigan is a freelance journalist for Elite Agent.