Many would-be borrowers are waiting for interest rates and inflation to stabilise
Last week’s lending figures from the Australian Bureau of Statistics reflect a “wait and see” approach to buyers’ engagement with property, according to the Real Estate Institute of Australia.
The latest ABS figures show the total value of new housing loan commitments fell 4.3% in December to $23.4 billion.
“This is from record high levels seen earlier in 2022 and a relatively small downward adjustment from this peak, coinciding with falls in retail spending as inflation and interest rates continue to rise,” REIA president Hayden Groves said.
Groves said that both investor and owner-occupier loans have fallen from their 2022 highs as Australians wait for the middle of this year, when interest rates and inflation are more likely to stabilise.
“New owner-occupier loan commitments fell 4.3% to $15.6 billion, while new investor loan commitments fell 4.4% to $7.9 billion,” Groves said. “In December 2022, the value of total new housing loan commitments was 23% higher than the level seen in February 2020, prior to the COVID-19 pandemic. In December 2021, the value of these commitments was 74% higher than the pre-pandemic level, which is indicative of price growth at that time. The figures show the value of total housing loan refinancing between lenders fell 1.5% but remained high at $19.1 billion in December 2022, but this is after seeing record-high refinancing activity for both owner-occupiers and investors.”
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Groves said that with Reserve Bank officials stating last week that inflation has likely peaked, the central bank should provide Australians with more certainty.
“Another rate rise will add to the burden most homeowners are feeling, and further discourage new entrants to buy their first homes,” he said. “Monetary and fiscal decision-makers should, in 2023, be doing everything they can to reassure Australians and alleviate the pressures many in the economy are experiencing.”
The Reserve Bank raised interest rates eight consecutive times last year, taking them from a record low of 0.1% to 3.1%. Most market-watchers expect the central bank to hike rates again at its meeting today.
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