Property battleground heats up for first home buyers as investors return 

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New home lending continued to surge in April with the value of new loans reaching a record high of $31.06 billion, according to new ABS Lending Indicators data released today.

This shows an increase of 3.7% from the month prior and a whopping 68.2% or $12.59 billion increase from April 2020, when the first nationwide lockdowns took place.

Finance Approvals

The activity in new home lending is shaping up to be a battleground for first home buyers with investors returning.

The value of new investment lending is up 63% over the year or 2.1% from March 2021 to reach more than $8 billion in new investment loans in April 2021.

At the same time, the value of first home buyer lending decreased for the third consecutive month, dropping by 1.9% in April 2021 from the month prior to $6.69 billion in new lending.

Australian mortgage holders managed to refinance $20.46 billion worth of loans in April 2021, however this was down 9.9% from activity in March.

Finance Approvals Purpose

Experts thoughts:

Canstar Group Executive, Financial Services, Steve Mickenbecker said,

“A year on from the start of the first Covid-19 lockdown and momentum in the property market continues to gain ground.”

“The relentless return of investors to the market has continued. Investors are going head to head with first home buyers at the lower end of the market, which has likely led to the small dip in first home buyers entering the market in April.

“First home buyers without the confidence to sign unconditional contracts and struggling to put a deposit together, are starting to feel crowded out.

“Bank savings interest rates are not helping first home buyers with ANZ dealing another blow by shaving a further five basis points off its savings products, with a maximum available rate of 0.35%.

“Lockdowns have done nothing to dissipate property demand. Even in Victoria where the second lockdown created a second bump, the market quickly regained ground. The current recurrence is likely to follow a similar trend.

“Covid-19 has created demand for standalone housing in the burbs and regions as Australians have rediscovered the dream of the quarter-acre behind the white picket fence.

“For existing mortgage holders, there’s never been a better time over the last year to get a better interest rate.

At the start of April last year there were no home loan interest rates below 2%. Fast forward to April this year and there were 179 loans under 2% and today that number reaches as high as 186.

“Canstar’s research estimates that less than 10.5% of the 2.4 million households in Australia with an owner occupied home loan have refinanced their loan this financial year, which means that the vast majority of borrowers are not taking advantage of record low interest rates*.”

*Based on the ABS Household & Family Projections and Canstar 2020 Consumer Pulse Report, at the end of June 2020 there were approximately 2,391,000 households with a mortgage.

RateCity.com.au research director, Sally Tindall, said:

“The home lending market is booming but soaring property prices are beginning to squeeze out first home buyers.”

“First home buyers made a comeback during COVID, however, they’re starting to be muscled out by cashed up investors and existing owner-occupiers able to pay top dollar at auctions,” she said.Real Estate Or Property Investment. Home Mortgage Loan Rate. Sav

“While the value of investor loans continued to grow this month, it wasn’t at the same rapid pace we saw in March.

“Investor lending is likely to continue to increase as investors surge back into the market in pursuit of capital growth.

“Banks are moving quickly to try to cash in on the investor comeback with 41 lenders cutting investor rates in the last two months.

“Australia has just clocked up six consecutive months of record levels of home lending. The idea that we need to relax responsible lending laws to improve the flow of credit is comical,” she said.

 

Home Loans

 

Residential Snapshot Infographic

Source of graphics: Property Council Research

 

Summary of the ABS Lending Indicators April 2021 data reveals:

  • The value of new loan commitments for housing in April increased to $31.06 billion, up 3.7% from the month prior while increasing 68.2% from April last year

    • The value of new loan commitments for owner occupiers in April increased to $23 billion, up 4.3% from the month prior and 70.1% year on year

    • The value of new loan commitments for investors in April reached $8.05 billion, up 2.1% from the month prior and 63% year on year

  • The value of owner occupier construction lending fell by 11.4% in April to reach $3.21 billion, though is still up 93.5% year on year

  • The value of refinancing decreased by 9.9% month on month. Mortgage holders refinanced $20.46 billion worth of home and investment loans in April 2021, in original terms

  • The number of owner occupier first home buyer loan commitments fell by 1.9% from the month prior, to reach 15,171, however the number of first home buyers remains 59.6% up year on year

  • Owner occupier first home buyer loan commitments accounted for 32.9% of all owner occupier commitments (excluding refinancing), in original terms.

Note: The above figures are all in seasonally adjusted terms unless specified.

 

ABS Lending Indicators

Apr-2020

Mar-2021

Apr-2021

Difference

% Change

Monthly

Annually

Monthly

Annually

Value of new housing commitments

Total Housing

$18.47 billion

$29.95 billion

$31.06 billion

$1.10 billion

$12.59 billion

3.7%

68.2%

Owner Occupied

$13.53 billion

$22.06 billion

$23.00 billion

$940.7 million

$9.48 billion

4.3%

70.1%

Investment

$4.94 billion

$7.89 billion

$8.05 billion

$163.6 million

$3.11 billion

2.1%

63.0%

Value of refinancing (original figures)

Total

$18.04 billion

$22.71 billion

$20.46 billion

-$2.26 billion

$2.42 billion

-9.9%

13.4%

Owner Occupied

$11.59 billion

$15.18 billion

$13.63 billion

-$1.54 billion

$2.05 billion

-10.2%

17.7%

Investment

$6.45 billion

$7.54 billion

$6.82 billion

-$714.5 million

$372.5 million

-9.5%

5.8%

Value and number of new construction lending for owner occupiers

Value

$1.66 billion

$3.62 billion

$3.21 billion

-$413.1 million

$1.55 billion

-11.4%

93.5%

Number

3,737

8,213

7,335

-878

3,598

-10.7%

96.3%

Value and number of new lending for owner occupier first home buyers

Value

$4.17 billion

$6.82 billion

$6.69 billion

-$131.6 million

$2.52 billion

-1.9%

60.4%

Number

9,504

15,468

15,171

-297

5,667

-1.9%

59.6%

Source: www.canstar.com.au. Based on ABS Lending Indicators, Apr-2021, seasonally adjusted figures unless otherwise indicated.

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About

Kate Forbes is a National Director Property Strategy at Metropole. She has 15 years of investment experience in financial markets in two continents, is qualified in multiple disciplines and is also a chartered financial analyst (CFA).
Visit Metropole Melbourne


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