New Loans Pick up as Australian House Prices Continue to Grow

A ‘SOLD’ sign is seen outside a house in Canberra, Australia, on Dec. 8, 2021. (AAP Image/Lukas Coch) NO ARCHIVING

New Australian housing mortgage commitments rose 4.4 percent in December to a record high value of $32.8 billion (US$23.3 billion) as house prices in the country continue to climb.

The Australian Bureau of Statistics (ABS) revealed that it was driven by a 5.3 percent increase in the value of new owner-occupier loans.

The average loan size for owner-occupier homes rose to a record high of $602,000 (US$428,000), increasing $6,000 over November alone. At the same time, the average first-home buyer loan size was $481,000 in December 2021, up 11 percent from $433,000 in December 2020.

Commonwealth Bank Senior Economists Belinda Allen and Kristina Clifton said they were surprised at the strength in new home lending given the increasing fixed mortgage rates over late-2021.

“We have already seen fixed rate mortgages move higher in recent months as well as the implementation of the higher interest rate serviceability buffer by APRA on Nov. 1, 2021, which both will assist in cooling the market,” they said (pdf).

The total value of new investor loan commitments also increased steadily, rising 2.4 percent to a record high of $10.3 billion (US$7.3 billion).

Amanda Seneviratne, the acting head of finance and wealth at ABS, said investor lending had grown over the past 14 months and accounted for around one-third of the value of new housing loan commitments in December.

“The previous investor lending peak in April 2015 accounted for 46 percent of new housing loan commitments,” she said.

New investor loan commitments rose strongly in the Australian Capital Territory, up 10.4 percent, had more modest rises in Victoria and New South Wales, but fell in all other jurisdictions.

A man walks past a derelict home, which sold for $1.6 million (US$1.2 million), in Sydney's northwest in Australia, on June 23, 2021. Swati Pandey/Reuters

The rising value of new home loans come as housing values increased at 1.1 percent in January, slightly up from the growth in December, Corelogic revealed.

However, the overall long-term trend shows slowing growth across most regions in Australia.

Australian houses grew 22.4 percent over the year, the highest annual rate since June 1989. This equates an approximate increase of $131,200 over 2021.

“The early indication is that housing markets are starting 2022 with a similar trend to what we saw through late last year. Values are still broadly rising, but nowhere near as fast as they were in early 2021,” Corelogic Research Director Tim Lawless said.

He said the softening in growth has been influenced by less government stimulus, worsening affordability, rising fixed term mortgage rates, tightening credit conditions, and a recent surge in new listings.

According to Corelogic’s median house price index, Melbourne and Canberra have now joined Sydney in surpassing the $1 million (US$711,000) mark. However, Sydney continues to climb ahead and sits at just under $1.4 million.

The difference between the national median house and unit value has continued to widen to a new record high of 28 percent in January.

Corelogic’s figures are always lower than Domain’s, which show that the median house prices for Melbourne and Canberra sit above $1.1 million and Sydney at $1.6 million.

An emergence of a two-speed dynamic across capital cities was also noted, where Brisbane and Adelaide markets are continuing to rise at 2 percent a month, while other cities are slowing.

“Melbourne and Sydney have seen inventory levels normalise over recent months, taking some urgency out of the market as supply and demand become more evenly balanced.

“The situation in Adelaide and Brisbane is very different; supply remains tight and buyer competition is a key factor supporting the upwards pressure on prices,” Lawless said.