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Highlights
- ABS data suggests that new investor housing loan commitments rose by 6.1% in January 2022.
- Loan commitments toward owner-occupiers were higher compared to those towards investors.
- First-time homebuyers are reducing in number despite a rise in the average loan size for owner-occupiers.
Australians indulged heavily in housing investments during January, indicating the continued strength of the real estate market in the country. As per the Australian Bureau of Statistics (ABS), new investor housing loan commitments rose by 6.1% in January 2022. The indicator reached a record value of AU$11 billion despite ongoing concerns surrounding the new strain and rising inflation.
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New loan commitments for investor housing have been rising for 15 continued months, contributing to the ongoing boom in the housing market. The prices in the market have risen at exceptionally high rates, reaching uncomfortably elevated levels.
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What does the data mean?
Overall, new loan commitments for housing rose 2.6% during the month, with owner-occupier commitments rising by 1%.
The data reflects the overall strength of the housing market, specifically among owner-occupiers. This stems from the fact that despite new loan commitments by investors reaching a record high, their share in the total housing market is only one-third. The loan commitments toward owner-occupiers form most of the market and have been recording strong growth over the last 18 months.
Across the states, investor loan commitments surged at their highest pace across the Australian Capital Territory at 22.8%, followed by Victoria at 11.1% and New South Wales at 9.8%. The rise in investor loan commitments helped the value of total housing loan commitments reach a record high of AU$33.7 billion during January.
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Australia Sees Robust Investor Lending In January
First homebuyers slowing down in the market
As the value of housing loan commitments surged, the value of lending to owner-occupiers was recorded at AU$22.7 billion in January. However, first-time owner-occupiers took out lesser loans across almost every state in January.
In Queensland, the number of owner-occupier first home buyer commitments fell 16.1%, while in Western Australia, these commitments declined by 8.1%. However, the average loan size for owner-occupier dwellings rose to a record high of AU$619,000 in January.
The solid rise in the average loan size for owner-occupier dwellings hinted at the rising value of commitments without much change in the number of new loan commitments.
Construction of dwellings
For owner-occupier housing, the value of new loan commitments for the construction of new dwellings fell 3.6% in January. The supply chain issues existing across the globe have impacted various industries, including construction.
Rising costs and labour shortages have become a common phenomenon across the sector, leading to the fall of some of the premier organisations. Experts suggest that the following months would be underpinned by harsher conditions for the construction industry, making it a highly risky territory.
The slowdown of new housing loans for construction somehow means that more owner-occupiers are choosing existing dwellings to reside in. The value of new loans taken for purchasing existing dwellings rose 2.3% in January.
Alternatively, new loans taken to purchase new dwellings were higher by 0.3% during the month but lower by 5.7% compared to a year ago. However, the value of new loan commitments for total construction finance rose 41.6% in January, after a rise of 66.6% during December 2021.
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