After a period of downturn, Australia’s housing market is now starting to look a little healthier.
According to the housing finance figures from the Australian Bureau of Statistics (ABS), Aussie households got 3.9% more new home loans in July than June – that’s after a 1.9% uptick in June and marks the fourth monthly increase in a row.
ABS Chief Economist, Bruce Hockman noted of the figures “…growth in new lending commitments to households was the strongest since October 2014.”
Where it’s at: Key sectors
A driving force in these statistics is the owner-occupier sector of the market – excluding alterations and additions – which saw a lending increase of 5.1% on seasonally adjusted data for July.
Property analysts, CoreLogic, drilled into the data and showed significant increases across three central housing finance sectors. The most dramatic rise has been in the owner-occupied, first home buyer sector, which saw a 20.9% increase in monthly lending – the highest monthly valuation since November 2009, almost a decade ago.
While the ABS says lending to households for dwellings (outside of refinancing) is still declining across the year, the latest stats suggest this trend may have bottomed out over winter, and householders and lenders are now turning their attention back to residential property investments – particularly in Sydney and Melbourne. In August, house prices increased in these cities by 1.6% and 1.4%, respectively.
With clearance rates tipping the 80% mark in Sydney last month, and with Melbourne not far behind, Australia’s biggest cities – after years of sliding values – are beginning to prod the residential market forward.
What it means: Policy impacts
Recent shifts in the finance landscape have helped boost confidence in the market and the stats are showing they are starting to get some traction.
The Reserve Bank of Australia dropped interest rates by 0.25% in July – for the second successive month – bringing the benchmark rate down to an historic low of 1%.
At the same time, Federal Parliament passed legislation that the Coalition government needed to fulfil its election promises to cut personal income tax. The $158 billion package will see around 10 million Australians get income tax relief from the 2019 financial year until 2025. Labor’s proposed changes to negative gearing and capital gains tax were stillborn.
Finally, banking regulator APRA has eased lending restrictions, prompting banks to open their purse strings, and fuelling increased competition. Mortgage rates remain as low as they’ve been across the home loans sector for 60 years.
What next? Cautious optimism
While government policy may have positive effects in the short term, the market’s attitude is one of cautious optimism, amid concerns over how stable the legislative environment is in a climate of political about-turns, leadership changes and global crises.
No-one is singing “happy days are here again” just yet.
It’s a little soon for talk of “booms” just yet, but it’s fair to say the explosive peaks of recent years are in the past. However, these figures show the clouds may be clearing. As Australia welcomes the warmer months, things in the residential property market may finally be heating up as well.