According to a new index from CoreLogic and Veda, homebuyers are injecting a greater proportion of equity into their property purchases than in previous years of the boom, despite the rise in prices and total loan values.

The surprising result is derived from a new measure, the application loan-to-valuation ratio (LVR) index. The national average of application LVR across Australia is currently tracking at 74.3%, down from a peak of 78.9% in 2013.

The index draws on the CoreLogic median dwelling values compared against the median residential loan application amount from Veda. “The result is a timely indicator of application loan-to-valuation ratios across Australia over time,” said Tim Lawless, the head of research at CoreLogic Asia Pacific.  

While the current application LVR is 1.7 percentage points higher than in 2011 (when it was 72.6%), it is considerably lower than when it peaked in 2013.

Moses Samaha, Veda’s general manager of commercial and property solutions, said the application LVR was being driven down by higher equity levels and substantial household wealth across the premium housing markets, especially in Sydney and Melbourne.

Rather counter-intuitively, the application LVR in Perth has risen from 72.8% to 77.1% in the past five years. The application LVR is also starting to rise again in Sydney.

Lawless said regulators and policymakers were likely to see the national lower application LVR as a positive outcome, which reflected a more prudent lending regime.

"One of the factors contributing to lower application LVRs is the heightened risk assessment many lenders are applying to select housing markets, whereby larger deposits are required to offset higher lending risk," he said.

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