Australian housing finance commitments surged by a further 8.6% for the month in December, rising to a new record high level as the effects of Victoria's reopening and policy stimulus continued to come through. Evident was an acceleration in construction loans ahead of the tapering in the Federal government's HomeBuilder scheme at the turn of the year.
Housing Finance — December | By the numbers
- Housing finance commitments ($ value, ex-refinancing) advanced for a 7th consecutive month with an 8.6% rise in December against the median estimate for a 4% lift, reaching a record high of $26.01bn (prior: 5.6%mth, 23.7%yr).
- Owner-occupier commitments lifted by 8.7%m/m extending its record high to $19.94bn (38.9%yr) (prior: 5.5%mth, 31.4%yr).
- Refinancing activity by owner-occupiers picked up in December (11.3%) after recent weakness to $6.93bn to be up by 8.1% over the year.
- Investor commitments posted an 8.2% lift in December (prior: 6.0%) to $6.07bn, driving the annual pace up to 10.9% from 3.9%.
Housing Finance — December | The details
Australian housing finance activity accelerated towards the end of the year driven by a catch up continuing to occur in Victoria—particularly from first home buyers—with the disruption of the shutdown out of the way and a rush to take advantage of the HomeBuilder scheme at its existing level ($25k) before the tapering of the grants (to $15k) from the start of 2021.
Over the final quarter of 2020, lending commitments made to owner-occupiers increased by 16.3% outpacing a 14.1% lift from the investor segment. Overall, housing finance commitments (excluding refinancing) lifted 15.8% in Q4 after a 20% rise in Q3. The year 2020 was a striking contrast between the first half where activity was suppressed by shutdowns and uncertainty before rebounding over the second half on reopenings and policy stimulus measures. Lending commitments surged by 22% over the second half compared to a 0.6% rise in the first half; owner-occupier lending soaring 26.5% in the 2nd half vs 3.4% in the 1st half and the investor segment swinging to a 9.4% rise from 6.6% contraction over the period.
Notable in December was the lift in lending for new construction rising 17.1% to the owner-occupier segment. This was undoubtedly associated with borrowers looking to obtain approvals before the grants available under the HomeBuilder scheme reduced from $25k to $15k. This has been a very stimulatory policy (shown below), with construction lending to owner-occupiers soaring by 122% since June (the policy commenced on June 4). Note also that this would be boosted by the effect of additional state government incentives on offer in some states (WA and Tas) for first home buyers undertaking new builds.
First home buyers have been a major beneficiary of the stimulus measures enacted and this is reflected by the surge in activity from the segment (see chart below). The value of commitments made to first home buyers accelerated by a further 14.1% in December (60.6%yr) while the number of approvals cleared by lenders jumped 9.3%m/m (56.6%yr). Again, this suggests, many first home buyers were looking to take full advantage of the HomeBuilder scheme before the end-of-year deadline.
In particular, there was very strong first home buyer demand coming through in Victoria (31.4%m/m) after a surge in November (23.5%) as well, but keep in mind that the segment in that state was halted by the second shutdown whereas in the other states the recovery was able to run without such a disruption.
The other key aspects from the state data were owner-occupiers extending their strength in the month, except in South Australia.
While in the investor segment, the upswing in activity is becoming more and more established with Western Australia (59.6%yr), Tasmania (45.2%yr), Queensland (26.9%yr) and New South Wales (15.9%yr) up sharply from a year earlier.
Turning to the approvals numbers in the owner-segment, construction-related approvals led the way surging by 14.7% in the month (85.3%yr) with contracts having needed to be entered into before 1 January 2021 to be eligible for the full $25k HomeBuilder grant. Within this, construction loans were up 15.3% (121.7%yr) and loans to purchase newly constructed homes lifted 13.1% (25.5%yr). Approvals to purchase established homes lifted 4.0% for the month (18.2%yr).
Housing Finance — December | Insights
The nation's housing market has built up very significant momentum over recent months, with conditions boosted by reopening effects combined with a range of policy stimulus measures. This was evident in this morning's data on house prices from CoreLogic with national capital city prices up for a 4th consecutive month lifting by 0.7% in January (1.7%yr), while regional centres advanced by 1.6% (7.9%yr). With house prices turning higher on the back of the stimulus measures, this will no doubt be a key area of discussion in the Q&A at tomorrow's speech by RBA Governor Philip Lowe and then at Friday's parliamentary testimony.