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Summary
- ABS estimates show an increase of 3.1% in the first home buyer commitments in November 2020, the highest rise since October 2009.
- The implementation of the HomeBuilder grant in June 2020 led to an increase of 75% in construction loan commitments post July 2020.
- Victoria saw a steep incline in the number of owner occupier loan commitments for the month of November 2020, while figures stagnated over smaller states.
ABS released the figures for new loan commitments that showed a record high level of new housing loan commitments for November. The total value of new housing loan commitments rose by 5.6% to reach a value of $24 billion in November. This was a 23.7% increase over November 2019.
The value of new occupier home loan commitments also rose 5.5% to a value of $18.3 billion in November 2020, which was an increase of 31.4% over November 2019. Among these loan commitments, loans taken for existing dwellings were the highest contributor with an increase of 5.9%.
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Largest growth since 2009
The figures estimated by ABS for the month of November 2020 suggest the largest growth in the number of home buyers since October 2009. The number of owner occupier first home buyer commitments rose 3.1% to a value of 13,905. This was a 42.5% rise over the last year.
The growth levels in 2009 were backed by the temporary threefold rise in the homeowner grant given by the Commonwealth Government under the economic stimulus packages offered post the 2008 financial crisis.
Backing these figures was the substantial rise in the value of construction loan commitments. The construction loan commitments rose by 5.6% in November alone and by a massive 75% in the period following July 2020.
Reasons Leading up to Greater Housing Loan Commitments
The HomeBuider grant by the Government largely contributed to the surge in housing loan commitments seen post July. The grant was implemented in June 2020, making the growth of 75% feasible post July.
Interest rates have also been kept at an all-time low, and investors, and home buyers believe that they would continue to remain so in the future. As was stated by the RBA, interest would not be increased until the inflation targets of 2-3% are not achieved. This could mean another 2-3 years of near zero interest rate levels, making it the perfect time for home buyers to invest.
Federal and state government packages have also contributed to these gains and have led to higher consumer confidence across the housing market.
As houses have become available for inspection, home buyers have flocked the market. Due to ease in restrictions across the main cities, vendors and buyers could go back to the normal method of viewing and inspecting houses. This allowed more and more buyers to enter the market, leading to the above results.
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State-wise Variations
The value of owner occupier home loan commitments showed varying increases across states, the value for bigger states showed an increase; however, the value for smaller states showed varying results. Owner occupier loan commitments in Victoria showed a sharp incline of 19.6% in November.
New South Wales also saw a rise in new loan commitments for both owner occupier as well as investor housing throughout November. The value for owner housing loan commitments in NSW increased by 1.7% during the month of November.
Over 2020, NSW has led the rise in owner occupier home loan commitments followed closely by Victoria. However, other smaller states showed not much change in housing loan commitments during the same period.
