The Average New Loan Size for Owner-Occupiers Hits a Record High: What Does This Mean for the Property Market?

Key takeaways

The total value of new housing loans rose 3.9 per cent in July to $30.6 billion, according to data released today by the Australian Bureau of Statistics.

The value of new investor loans rose 5.4 per cent to $11.7 billion, which was 35.4 per cent higher than July 2023. The value of owner-occupier loans rose 2.9 per cent to $18.9 billion, 21.4 per cent higher than July 2023.

The value of new owner-occupier first home buyer loans rose 0.8 per cent in July, which was 19.7 per cent higher than July 2023.

The total value of new housing loans rose 3.9 per cent in July to $30.6 billion, according to data released by the Australian Bureau of Statistics.

• The value of new investor loans rose 5.4 per cent to $11.7 billion, which was 35.4 per cent higher than July 2023.
• The value of owner-occupier loans rose 2.9 per cent to $18.9 billion, 21.4 per cent higher than July 2023.
• The value of new owner-occupier first home buyer loans rose 0.8 per cent in July, which was 19.7 per cent higher than July 2023.
• The average new loan size for owner-occupier borrowers reached a record high of $640,998 in July 2024. This represents a significant 8.1% increase from the $593,213 average in July 2023.

Despite the Reserve Bank of Australia's (RBA) clear indications that rate cuts are off the table until the new year, buyers are clearly still prepared to dig deeper into their pockets to secure a piece of the Australian dream.

So, what does this mean for potential buyers, and how does this impact the broader property market?

Let's break down the numbers and explore what’s driving these changes.

A snapshot of the current market

With the average loan size now at $640,998, an owner-occupier with a 20% deposit would be shopping for properties around $801,248 (excluding stamp duty and other associated costs).

According to Canstar's analysis, this isn’t just a Sydney or Melbourne phenomenon; the trend spans across all states:

It's clear that despite rising interest rates and inflationary pressures, Australians are still diving into the property market, often taking on larger loans to do so.

The latest Canstar analysis shows that these buyers are committing to estimated repayments nearing $4,000 per month, which is a significant financial burden for many households.

Who's moving the property market needle?

The data isn’t just about loan sizes—it’s also about the surge in buyer activity.

In July, 53,899 new buyers entered the market, a 6.8% increase from the previous month and a staggering 26.2% rise annually.

Interestingly, it's investors who are leading the charge, with a 35.4% annual growth in the number of new loans, indicating that the appetite for investment properties remains robust even in the face of high interest rates.

First-home buyers, on the other hand, continue to struggle.

Although there was a slight 0.8% increase in the number and value of loans to first-home buyers, this segment remains stuck in first gear.

It’s a stark contrast to the booming investor activity, and it highlights the ongoing challenges for those trying to break into the market.

A thriving market despite rate hikes

The total value of lending in July 2024 hit $30.58 billion, the highest since May 2022—marking the beginning of the current rate rise cycle.

It's almost mind-boggling to think that, despite thirteen rate hikes, the market is still pushing forward with such momentum.

As Sally Tindall, Canstar’s Data Insights Director, puts it:

"The value of new lending in July was almost as much as it was before the start of the hikes when the cash rate was just 0.10 per cent."

Investors, in particular, have shown resilience, recording the sixth consecutive monthly increase in the value of new loans.

Tips for first-time buyers looking to enter the property market 

1. Expand your search Are you prepared to look further away from work? Would you consider a 1-bedroom apartment instead of a 2-bedder? Recognise that this is likely to be your first property purchase, not your last.
2. Understand who holds the balance of Spring has sprung and so have property listings in some areas. If the number of properties outweighs the number of buyers, you might be able to negotiate on price.
3. Don’t let your home deposit sit idle while you hunt Make sure it’s safe, easily accessible but earning a decent rate of interest that’s ideally over 5 per cent.
4. Maximise your borrowing capacity by reducing the number of credit cards and/or card limits and paying off any existing debts (where possible).
5. Consider Buying your first property as an investor will see you potentially miss out on stamp duty exemptions and grants, however, you could see a major boost to your borrowing capacity if the bank is confident you’ll get a steady source of rent from your property, especially if you’re one of the lucky ones that can live rent-free in the family home.
6. Don’t underestimate the additional Stamp duty and Lenders Mortgage Insurance is the obvious ones but make sure you consider bank fees, legal fees, valuation fees, building and pest report fees, government fees and home insurance. There are also ongoing costs such as council rates, strata fees and water service charges to potentially factor in.

About Chris Dang Chris Dang is an accountant by training and has worked in the Financial Planning industry for many years. Chris brings together property, accounting, and financial planning experience to help clients of Metropole Wealth Advisory create a holistic plan for their wealth.