New mortgage commitments have declined for the first time since May 2020, with new loan commitments for owner-occupier housing also registering a drop.
The Australian Bureau of Statistics’ (ABS) lending indicators data for February 2021 has shown that new loan commitments for housing fell for the first time since May 2020, dropping by 0.4 per cent to $28.6 billion in February (seasonally adjusted terms).
The value of new home loan commitments for owner-occupiers fell by 1.8 per cent to $21.7 billion in February.
This followed a 10.9 per cent increase in January to $22.1 billion, the highest monthly figure on record and the first time this segment broke the $22-billion mark.
However, commitment levels have remained strong compared with last year, with ABS figures showing that new loan commitments for housing increased by 48.8 per cent in February 2021 from February 2020, while owner-occupier housing increased by 55.2 per cent.
New loan commitments for investors rose in February 2021 by 4.5 per cent to almost $7.0 billion, representing a 31.6 per cent rise from February 2020.
Commenting on the figures, ABS head of finance and wealth Katherine Keenan said the fall in commitments in February was driven by lower loan commitments for existing dwellings, but noted that the value remained 39.7 per cent higher than in February 2020.
“The value of loan commitments for the construction of new dwellings rose 4.4 per cent, continuing a period of record rises since July 2020,” Ms Keenan said.
“Although the HomeBuilder grant, introduced in June 2020, was reduced from 1 January 2021, it was made more widely available to borrowers in NSW and Victoria through increased price caps on new build contracts.”
Commenting on the rise in investor loan commitments, Ms Keenan said: “The time taken to process home loans meant that construction loan applications made in late 2020, prior to these changes, also contributed to loan commitments reported in February.”
Analysis by Housing Industry Association (HIA) chief economist Tim Reardon of the ABS figures showed that the number of loans for the construction of a new dwelling rose in February, and was the sixth consecutive month of record highs.
He added that the number of construction loans to owner-occupiers in the three months to February 2021 is 43.0 per cent higher than the previous quarter, and two and a half times higher than the same period last year.
He also noted that lending for renovations reached its highest level since 2009, with the value of loans for alterations and additions in the three months to February 2021 47.6 per cent higher than the same time last year.
First home buyers accounted for over 40 per cent of loans over the last seven months, with Mr Reardon stating that they are “riding the HomeBuilder wave”, and that this is the strongest share for the segment since the stimulus released during the GFC.
Across the states, the number of loans to owner-occupiers for the construction of a new dwelling in the three months to February 2021 compared with the same time last year has more than tripled in Western Australia, tripled in the Northern Territory, almost tripled in Queensland and Tasmania, more than doubled in South Australia, ACT and Victoria, and almost doubled in NSW, Mr Reardon’s analysis showed.
Speaking about the trends, Mr Reardon said: “Demand for new housing has been surging since mid-2020 due to a combination of the HomeBuilder program, record-low interest rates and the shift in populations away from apartments and capital cities towards detached housing and regional areas.”
“Households have changed their spending habits in response to the COVID-19 interruptions. Many have diverted funds that would have typically been spent on travel and entertainment into buying a new home or improving their existing one.”
He concluded: “This data provides further evidence of the exceptionally strong volume of new homes that will commence construction in 2021 as well as record level of expenditure on renovations.”
[Related: Home values up 400% in 30 years: study]