Lending for new homes is strong

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Aug 11, 2016

Lending for new homes is strong

Low interest rates trumped election uncertainty in June, when ABS data shows lending for new homes rose strongly.

Image: Herald Sun.

New home lending rose in June, according ABS data.

“The RBA cut its interest rate at the beginning of May so June’s housing finance results are the first month’s data to fully capture the effect of cheaper mortgage costs,” explained Housing Industry Association Senior Economist, Shane Garrett.

In June 2016, the number of loans to owner occupiers for dwelling construction rose 2.1% in seasonally adjusted terms, while loans for the purchase of new homes grew 2.7%. Overall, new home lending volumes increased by 2.3% during the month, which was 6.3% higher than for the same month last year.

Garrett said buyers looked beyond uncertainties in the lead up to the 2 July election, and instead took their lead from record low interest rates. He said the July rate cut, announced after the period included in the latest ABS data, is likely to keep new home lending strong.

“Prospective homebuyers seem to have taken advantage of the lower interest rate environment,” said Garrett.

“June was also dominated by the close federal election campaign which was the source of some uncertainty across the economy. Today’s data indicate that the benefits of lower interest rates trumped any reluctance by buyers to enter the market during the tight election race. It’s therefore likely that last week’s interest rate cut will help bolster activity on the new home building side,” concluded Garrett.

Though gains were recorded overall, lending to owner occupiers for constructing or purchasing new homes was uneven across the country. The strongest growth was in Victoria (+19.1%), followed by New South Wales (+10.8%). There was a more measured increase in Queensland (+4.3%). Over the same period, there were substantial reductions in Western Australian (-20.7%), and the Northern Territory (-17.7%) while Tasmania recorded a more modest fall (-3.5%). New home lending to owner occupiers in South Australia and the ACT during June 2016 was approximately the same at the level of a year ago.