HomeBuilder stimulus catalyst for record new loan commitments

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December 04 2020
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The housing market continues to show signs of strength, with new loan commitments reaching a record high due to supportive fiscal policy, official figures have shown.

HomeBuilder stimulus catalyst for record new loan commitments

Stats released by the Australian Bureau of Statistics (ABS) show the total value of new loan commitments for housing rose 0.7 per cent to $22.7 billion in October, seasonally adjusted.

The value of new owner-occupier home loan commitments rose 0.8 per cent to $17.4 billion in October 2020, more than 30 per cent higher than October 2019.

“Commitments for the construction of new dwellings rose 10.9 per cent and was the largest contributor to the rise in October’s owner-occupier housing loan commitments,” ABS head of finance and wealth Amanda Seneviratne said.

“The value of construction loan commitments has risen by 65.6 per cent since July, which coincides with the June 2020 implementation of the government’s HomeBuilder grant in response to COVID-19”.

Ms Seneviratne, added that “feedback from lenders was that there has been a large increase in first home buyers applying for these construction loans over the last few months”.

HIA economist Angela Lillicrap has credited accommodating fiscal policies as a major contributor to the housing market.

“HomeBuilder was the catalyst for improving consumer confidence in the housing market. The strength of housing finance data is also due to several factors, including low interest rates,” Ms Lillicrap said.

“The number of construction loans to owner-occupiers in the three months to October was 62.3 per cent higher than the same time last year.

“The number of loans for the purchase of land in the three months to October 2020 has also doubled compared to the same period in 2019.”

The economist stated she does not expect this to be the peak of the cycle.

“HIA New Home Sales data suggests that detached housing finance approvals will continue to be strong over the coming months. The extension of HomeBuilder will see strong results carry over into 2021,” she said.

The ABS Lending Indicators data for October found the number of loan commitments for NSW first home buyers was the strongest since December 2011.

Grant Foley Property buyer’s agent Grant Foley said it was clear that first home buyers were making the most of the more subdued market conditions in Sydney.

“The COVID-driven change in market conditions has presented first-time buyers with a genuine opportunity to make their move, especially in the inner-urban apartment sector, which is typically popular with first-time buyers and has suffered bigger price falls than houses in similar areas,” he concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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