Buyer activity increasing despite rising interest rates
New loan commitments increased by 4.8% in May, reaching a total of $25 billion, according to data from PropTrack. This suggests an increase in property buyer activity despite 12 interest rate hikes since May last year.
Investor lending rose 6.2%, while owner-occupier lending increased by 4%. Compared to the low point in June 2020, new lending volumes have surged by 45%.
“Lending has been steady since late last year and the recent increases in May and March indicate that property seekers are willing to enter the market despite high lending rates,” said Karen Dellow (pictured above), senior audience analyst at PropTrack.
The number of new commitments and the total loan amount surpass pre-pandemic levels from February 2020. The total dollar value of loans has surged by $5.6bn, representing a 29% increase.
First-home buyers and investor loans
First home buyers have shown signs of a comeback, with $4.1bn in loans granted in May, indicating a 5.5% month-on-month rise. The peak for first home buyer lending occurred in January 2021, with $7bn in new commitments approved.
“However, first timers began dropping out of the market earlier than investors and other owner-occupiers as prices skyrocketed,” Dellow said.
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While investors and other owner-occupiers continued borrowing throughout 2021, their pace slowed leading up to the first interest rate hike. In mid-2021, first home buyers briefly surpassed investors in terms of the share of new lending due to the popularity of the HomeBuilder Grant and record-low borrowing costs.
After the grant period ended, first home buyer loans declined due to the increasing challenge of affording a property amidst soaring prices, despite low interest rates.
New loan commitments by state
When looking at new loan commitments by state, the most significant month-on-month growth in owner-occupier lending occurred in NSW and Tasmania, both experiencing over 9% increases. Meanwhile, the ACT, Northern Territory, and South Australia had the largest uptick in investor lending.
First home buyers’ loan commitments rose in the ACT, NSW, and Victoria. In Canberra, there was a 13% month-on-month increase in new lending commitments, a significant development considering its position as the second-highest median house price in the country.
What regions have the most demand?
Enquiry data from realestate.com.au revealed concentrated demand from first home buyers and investors in various regions. Although demand from these buyer types remained lower compared to the previous year, numerous regions experienced an increase in enquiries during June 2023.
Sydney and Perth regions exhibited the highest year-on-year growth in enquiries, with Brisbane - West leading in terms of the largest growth for both buyer types. Indooroopilly emerged as a popular area for first home buyers due to its proximity to The University of Queensland, the CBD, and other amenities.
“With home prices on the rebound and a pause in rate rises this month, buyer interest is increasing,” Dellow said. “The new loan commitment data shows that there is demand for properties, despite the higher home loan rates and low available stock.”
“We are also seeing these improvements during the winter months when the market is seasonally quiet, which bodes well for a strong spring selling season.”
