Investor lending up in June

By Gerv Tacadena | 06 Aug 2020

Housing finance bounced back in June, recovering from its historic fall in May. This could signal the resurgence of activity from both home buyers and investors, according to experts.

The value of housing loans went up by 6.2% in June on a seasonally-adjusted basis, figures from the Australian Bureau of Statistics (ABS) show.

The investor segment posted higher growth in housing loan commitments at 8.1% than the 5.5% gain in the owner-occupier segment. Financing commitments from first-home buyers also improved, up by 3.3%.

"Despite the rebound in lending activity, the value of housing loan commitments in June was down over 10% compared to March after large falls in April and May," said Bruce Hockman, chief economist at ABS.

Hockman said the rise in mortgage commitments in the month reflects the easing of COVID-19 restrictions and the resuming of operations in the property sales market.

Adrian Kelly, president of the Real Estate Institute of Australia, said New South Wales accounted for a bulk of the rise in investor lending while all states except for Victoria and ACT contributed to the growth in the owner-occupier segment.

"The recovery in lending is not unexpected with restrictions on movements easing throughout the month. Whilst the roller coaster in lending will continue, the low levels of supply will hold the market up," he said.

Maree Kilroy, economist for BIS Oxford Economics, said the stage four lockdown in Victoria will be a drag in the growth of housing commitments in the next few weeks.

"With Melbourne representing Australia's biggest greenfield housing market, the hit to national new dwelling demand will be material," she said." The impact is anticipated to be mostly temporary, with the expected easing of lockdown restrictions, combined with stimulus including record low interest rates and the HomeBuilder program boosting new dwelling demand."

Geordan Murray, senior economist for the Housing Industry Association (HIA), said the latest ABS figures have yet to show any material impact from the announcement of the HomeBuilder Scheme.

In fact, the 9.7% growth in financing commitments for established housing was not replicated in the lending for the construction of new homes.

"The figures tracking loans for construction have yet to reflect the pick-up in demand for new homes that has occurred since the HomeBuilder program was announced. In June the number of construction loans actually dropped to the lowest monthly level since 2012," Murray said.

However, Murray raised concerns on the surge of take-up for available blocks of land. He said loans for the purchase of land increased by 33.8% in June.

"The surge in lending for land purchases highlights a risk that the availability of residential lots where onsite work can begin within the time-frame of the HomeBuilder package could limit take-up under the program," he said.

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