INDUSTRY NEWSNationalReal Estate News

Owner-occupiers lead the uptick in new lending

New lending is back on the rise after increasing 2.2 per cent in August, however, the overall level of lending remains down on last year.

According to the latest ABS Lending Indicators data, owner-occupiers continue to lead the way, with a 2.6 per cent increase in new loans, but they remain 12.3 per cent lower compared to last year.

Meanwhile, investment lending has increased 1.6 per cent month-on-month.

Overall, the value of new loans hit $24.82 billion in August, which is 9.4 per cent lower than August 2022.

Canstar’s Group Executive, Financial Services, Steve Mickenbecker said higher interest rates have been weighing on buyer demand.

“Demand is still not adequate to support high property prices when supply normalises, and a price fall is not out of the question,” Mr Mickenbecker said.

“The fall in average new loan size for owner-occupiers to $585,000, which is down 5 per cent from its peak at the start of 2022, is holding down lending volumes.” 

Mr Mickenbecker said with property prices well on the way to recovery, this suggests that buyers have started compromising on the value of the property they are purchasing.

“With interest rate cuts not looking likely until well into 2024, repayment affordability will continue to restrain a recovery in new lending growth for quite some time,” he said.

Real Estate Institute of Australia (REIA) President Hayden Groves said the number of new owner‑occupier loans appears to have returned to levels seen prior to Covid, but are still well below the peak in January 2021.

“Of note is the number of refinancing loan commitments of owner-occupiers is falling indicating that there is renewed confidence that interest rates are stable,” Mr Groves said.

The ABS also showed the number of refinanced owner-occupier loan commitments between lenders fell 5.4 per cent to 26,539, after reaching an all-time high last month as mortgagors looked for the best deal available.

Mr Groves said building approvals were also increasing, with the number of dwellings approved rising 7 per cent in August, in seasonally adjusted terms, following a 7.4 per cent fall in July.

Master Builders Australia Chief Economist Shane Garrett said both detached houses and higher density home building approvals shared in the expansion, up 6 and 8.8 per cent respectively.

“However, the volume of new approvals is still considerably lower than this time last year,” Mr Garrett said.

“Over the year to August 2022, new home building approvals are still down by 13 per cent.

“Detached house approvals have suffered a sharp reversal since their peak during Covid.”

Mr Garrett said the pipeline of higher density home building activity, which is critical to ensuring adequate rental supply, had been weak since even before the pandemic.

“We still need to see a sustained improvement in the volume of higher density home building in order to relieve inflation which is at 15-year highs,” he said.

Master Builders forecast home starts to decline a further 2.1 per cent in 2023-2023 to about 170,100, which is well below the 200,000 needed per year to meet population growth.

Meanwhile, in New Zealand, lending activity has also risen in August, marking the first annual increase in lending volumes since August 2021.

According to the Reserve Bank of New Zealand (RBNZ) there was $5.8 billion of gross mortgage lending activity in August, up by $0.4 billion from a year ago. 

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.