20 January 2014 Housing finance through the roof

Home loan approvals in November reached their highest level in more than four years, according to new data released yesterday by the Australian Bureau of Statistics (ABS).

New South Wales, Queensland and Western Australia were the strongest-performing states, helping the housing finance market return to pre-GFC levels.

Loan Market director of sales Mark De Martino says the low and stable interest rate environment that characterised 2013 has been a critical factor in drawing out more homebuyers.

“New South Wales has recovered nicely over the past two years, with consecutive month-on-month growth since January 2012,” De Martino says.

“The resource-rich states of Queensland and Western Australia approved 15 per cent and 12 per cent (respectively) more loans (in November) than the same time (the previous) year.”

While official statistics show first homebuyer activity remains very low in most states and territories, De Martino has a theory as to why.

Since the removal of grants for established properties in almost every state, the statistics have become skewed, he believes. Reported first-time buyer finance commitments are only for those using a concession or grant.

Given that the remaining government incentives for first-timers are geared towards newly-built or off-the-plan dwellings, the data isn’t collecting any other first homebuyers.

“Enquiries for first homebuyers remain strong at Loan Market, accounting for 39 per cent of enquiries in November and December. These active buyers are shopping around and waiting for the right property and time to purchase. The first homebuyers of 2014 are going to be very prepared and well researched.”

There are growing signs that the Reserve Bank of Australia could raise the official cash rate at some stage in 2014, he says.

“Fixed rates for both two and three-year terms have been adjusted upwards, albeit by small increments, by several lenders in the past few weeks.”

Major banks tend to shift their fixed rates back up when they sense official rates could be about to move, he says.

Reproduced in full with permission: Australian Property Investor Housing finance through the roof 14 January 2014

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