In recent months, Australia’s home loan market has experienced unprecedented growth, reaching record levels despite a slight dip in May. The Australian Bureau of Statistics (ABS) reported a 1.7% decline in new housing loans in May, amounting to $28.8 billion. First-home buyer loans took the biggest hit, dropping by 2.9%. However, over the past year, new loan commitments have surged by 18%, indicating a robust overall growth trend.
Investor lending has been outpacing owner-occupier lending, particularly in states like New South Wales, Queensland, and Western Australia. Queensland, in particular, has seen significant growth, with investor loans reaching an all-time high of $2.4 billion in May, surpassing Victoria for the third consecutive month. This growth is driven by investors taking out larger loans, especially in the Sunshine State.
Despite higher interest rates, the market remains robust. The average new owner-occupier mortgage nationally is now $626,055, a record high. This is remarkable given that the cash rate is at a 12-year high of 6.27%. Borrowers are passing bank stress tests at an average rate of 9.27%, indicating significant financial strain on new homeowners.
The divergence in property market performance across different regions underscores the complexity of the housing market. While cities like Sydney and Melbourne are experiencing moderated growth, mid-sized capitals such as Perth, Adelaide, and Brisbane continue to see robust price increases. This regional disparity is influenced by local economic conditions, housing supply constraints, and varying levels of demand.
ABS data highlights that the average new loan size for owner-occupiers hit record highs in Queensland, South Australia, and Western Australia. New South Wales still leads with the largest average loan size at $767,584, although this is below its peak of $803,235 in January 2022. Victoria saw a decrease in average loan size to $601,891, well below its peak of $651,364 two years ago.
May’s slight decline in new housing loan commitments suggests a softening trend after strong growth earlier in the year. The value of owner-occupier loans fell by 2%, while investor loans decreased by 1.3%. This aligns with other housing indicators such as auction clearance rates and sales turnover, which have eased and suggest a slowdown in dwelling price growth in the second half of 2024.
House prices in cities like Brisbane, Perth, and Adelaide are at record highs, outpacing growth in Sydney and Melbourne. Analysts expect price momentum to temporarily slow but anticipate an acceleration in early 2025 due to interest rate cuts and housing shortages. However, housing affordability will likely cap these gains.
The future of home lending will be influenced by a combination of economic conditions, government policies, and market dynamics. The expected interest rate cuts in early 2025, ongoing housing shortages, and the resilience of the property market will play crucial roles in shaping the trajectory of home prices and loan sizes in the coming years.
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