Chief Economist at Archistar, Dr Andrew Wilson, weighs in on record lending fuelling the housing market revival and building boom.

“Lending for housing continues to soar, reflecting recent clear revivals in capital city housing markets and the impact of government policies stimulating significant demand for new homes.

The ABS reports that seasonally adjusted housing loans approved over September increased sharply again to another record level - rising by 5.9% to $26.41bn.

Although the September increase was well below the previous month’s record rise of 31.2%, the growth in home lending since the easing of the autumn on cornavirus shutdown restrictions has been remarkable – rising by 36.9% since May.

Despite the autumn restrictions clearly impacting lending activity, housing loans approved over the first 9 months of this year have increased by 16.4% compared to the same period last year.

Lending for new home building was a significant contributor to September’s overall new record total, with loans up by a remarkable 27.1% over the month following an increase of 2.3% the previous month. So far this year lending for new home building has risen by 14.1% compared to the same period last year.

Home building loans accounted for a record 9.8% of total lending for housing reflecting the impact of the federal government's HomeBuilder policy that provides new home building deposit grants of $25,000 for eligible applicants.

WA reported the highest state increase in home lending over September up by 23.5% followed by QLD up 12.7%, SA up 9.8% and NSW rising 9.7%. VIC home loans however fell 7.2% over the month indicating the constraints in that state of the coronavirus shutdown at that time.

VIC however accounted for the highest number of home building loans over September with 1992 – up 31.6% over the month. Next highest was QLD with 1372 - up 34.9%, followed by NSW 1058 - up 25.5%, WA 1014 - up 40.6% and SA with 482 – up 26.2%.

The boom in home lending is set to continue over coming months with already strengthening housing markets now fuelled by lower interest rates. With lockdown restrictions now eased, the Melbourne housing market is now showing clear signs of revival and will significantly add to demand for home loans.

Lending for home building will also continue to surge with the HomeBuilder offering set to expire at the end of 2020 - although given its success and positive impact on the economy, the government may be tempted to extend the deadline into 2021.”

Sarah Buckley

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