The latest report from PropTrack revealed that new loan commitments increased by 4.8% in May 2023 to $25 billion.
This means that property buyers are becoming increasingly active even after 12 interest rate rises since May 2022.
The report also showed that investor lending picked up the most, with a 6.2% increase, while owner-occupier lending rose by 4%.
This puts new lending volumes 45% above the recent low in June 2020, when it dropped to $17 billion.
Ms Karen Dellow, PropTrack's Senior Audience Analyst explained:
"New commitment volumes will unlikely return to the highs of 2021, when rates were at historic lows, in the near term.
However, lending has been steady since late last year and the recent increases in May and March indicate that property seekers are willing to enter the market despite high lending rates.
It is also important to note that the number of new commitments and the total dollar amount are higher than pre-pandemic levels (February 2020). Total loan dollar amounts are $5.6 billion higher - a 29% increase."
First-home buyer and investor loans increase
According to PropTrack's data, first-home buyers have begun to return to the market, with $1.4 billion written in loans in May - a 5.5% month-on-month increase.
Lending to people buying their first homes reached its highest point in January 2021, with a staggering $7 billion of new loan approvals.
However, first-time buyers started pulling out of the market earlier than investors and other people looking to buy homes to live in, mainly because of the skyrocketing prices.
In December 2020, new commitments for first-home buyers made up 25% of all loan approvals, higher than those from investors.
However, if we look at the PropTrack Home Price Index and compare it with the loan commitments for different types of buyers, we can see that first-time homebuyers started backing out only 10 months into the pandemic when prices started going up by around 2% every month.
This clearly shows that prices have become too high for many people who are trying to purchase their first home.
Ms Dellow commented:
"Both investors and other owner-occupiers continued to borrow during 2021, but slowed down in the lead up to the first interest rate rise.
First-home buyers overtook investors for share of new lending in mid-2021 thanks to the popularity of the HomeBuilder Grant and record-low borrowing costs.
However, as soon as the grant period ended, there was a drop in first-home buyer loans.
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Property prices were also rising at record speeds, making it hard for first-home buyers to afford a property, even with extremely low-interest rates."
New loan owner occupier and investor commitments by state
According to PropTrack's data, the largest month-on-month increase in owner-occupier new lending by state comes from New South Wales (NSW) and Tasmania (TAS), which both recorded more than 9% growth.
Further, the largest increase in investor new lending was in the Australian Capital Territory (ACT), the Northern Territory (NT), and South Australia (SA) – all recorded significant month-on-month growth.
First-home buyer new loan commitments by state
PropTrack's data revealed that the number of new lending commitments for first-home buyers is increasing, particularly in ACT, NSW, and VIC.
On the other hand, new loan commitments in Canberra increased by 13% month-on-month, which is significant given the median house price in Canberra is the second highest in the country.
Hotspots for first-home buyers and investors
According to data from realestate.com.au, we can see which areas in Australia have the highest concentration of first-home buyers and investors.
While the demand from these buyer types is lower compared to last year, there are several regions where enquiries have increased in June 2023.
When it comes to year-on-year growth in enquiries, Sydney and Perth regions have experienced the highest rise.
However, Brisbane - West takes the lead in terms of both buyer types, showing the most significant growth.
Indooroopilly is particularly popular with first-home buyers, as it is close to The University of Queensland, the CBD, and other amenities.
What's ahead?
Ms Dellow said, "With home prices on the rebound and a pause in rate rises this month, buyer interest is increasing."
She further commented:
"The new loan commitment data shows that there is demand for properties, despite the higher home loan rates and low available stock.
We are also seeing these improvements during the winter months when the market is seasonally quiet, which bodes well for a strong spring selling season."
Source of charts and commentary: REA Insights
