Michael BlebySenior Reporter

Jan 16, 2020 – 1.04pm

Owner-occupier home loans jumped 10 per cent in November from a year earlier as access to credit eased and rising house prices across the eastern seaboard drew buyers back into the market.

The increase in new mortgage commitments to owner-occupiers lifted the monthly total to a seasonally adjusted $13.4 billion, up 1.6 per cent from October’s $13.2 billion, official figures on Thursday showed. It was the highest monthly total since June 2018.

Home buyer activity is concentrated on established dwellings.  Peter Rae

The rise helped drive a larger-than-expected monthly gain of 1.8 per cent in total lending – above expectations of a 1.4 per cent gain – and pushing the value of first home buyer loan commitments to a 10-year high.

“The housing market is on its way back,” said CommSec chief economist Craig James.

“That means more homes will be purchased and create flow-on demand to a raft of businesses including removalists, real estate agents and homewares retailers.”

But credit growth is far from tearaway levels.

“We expect the housing market to remain relatively firm thanks to RBA rate cuts and somewhat easier lending conditions since mid-19,” JP Morgan economist Ben Jarman said.

“At the current pace of credit growth, households are still de-leveraging, so housing is neither adding much upside to consumption, nor is it a constraint to further monetary policy easing.”

Improving access to credit is boosting expectations that higher demand for housing will again stimulate home-building.

The ANZ/Property Council of Australia’s latest quarterly survey published separately on Thursday shows residential construction activity is likely to turn positive again in the second half of this year as Australia’s development cycle starts to pick up once again.

But it will take some time.

“Given the decline in building approvals from peak it is likely construction activity will continue to fall for some quarters,” NAB economist Kaixin Owyong said.

Thursday’s figures reinforced the message that a pick-up in construction has yet to take hold, showing that home buyer activity was concentrated on established dwellings.

Owner-occupier loans rose in value and, by number, loans for the purchase of existing dwellings was little changed at 19,866 in November from 19,840 in October.

But the number of loans for construction of new dwellings fell 8.4 per cent to 3028 from 3305 a month earlier.

“Dragging down the monthly result was an 8 per cent fall in loans for the construction of a dwellings, whilst the recovery in the established market saw loans hold steady for the purchase of existing dwellings,” BIS Oxford Economics economist Maree Kilroy said.


Housing construction expectations surge

While investor borrowing picked up 2.2 per cent month on month to $5.2 billion, new loan commitments to investor borrowers remain 3.2 per cent down on their level a year earlier. The pace of decline has slowed – in November 2018, the year-on-year decline was a much larger 28 per cent.

“The positive result for investor lending is consistent with other indicators which are all telling us that the housing market has entered the early stages of a recovery following a difficult couple of years,” Master Builders Australia chief economist Shane Garrett said.

The number of first home buyer loans is likely to increase, especially once the official data includes the boost from the federal government’s first home buyer loan scheme, which started this month.

“While we haven’t returned to the peak of first home buyer levels, we’re likely to see more buyers continue to surge into the market this year, particularly helped along by the first home loan deposit scheme,” said Paul Marshall, chief executive of comparison site ratecity.com.au.