What do we know from the latest housing finance data? 

Master Builders Australia's Chief Economist Shane Garrett provides some insights, especially about what the figures reveal about the impact of HomeBuilder. 

 

  • Most categories of residential lending grow during July.
  • Early evidence that HomeBuilder is helping stimulate demand.
  • Renovations and investor lending also improve.
  • Continued government support still crucial.

Most categories of home lending saw growth during July 2020 according to updated figures from the ABS. The new data series offers an early indication of the impact of the federal government’s HomeBuilder scheme which was announced in early June and rolled out over subsequent weeks. The table below provides a snapshot of today’s results. Breakdowns for each of the states and territories are provided at the end of the document.Total-Loans-By-Category.png

During the month of July 2020:

  • The total number of housing loans to owner occupiers rose by 11.9% nationwide compared with the previous month and is now 11.2% higher than the same period last year
  • For housing investor loans, growth was more muted during July (+0.3%) and the volume of activity on this side of the market is still well down on a year ago (-13.6%).

Of course, the HomeBuilder scheme was specifically aimed at supporting greater levels of new home building across the economy. At this early stage, the indications on this front appear positive. The number of loans to owner occupiers for the construction of a new home jumped by 9.0% in July and activity here is also well above where we were this time last year. More substantial was the expansion in the number of loans for residential land purchase by owner occupiers, which advanced by some 21.6% in July alone and is now up by 66.1% on 12 months ago.

The volume of loans to owner occupiers for the purchase of newly-built dwellings rose more modestly (+4.0%) during July, but is now significantly higher (+21.4%) compared with a year ago.

Major renovations works are also eligible for support from the HomeBuilder scheme. During July, the number of owner occupier loans for the purpose of home alterations and additions grew by 6.3%. However, unlike other areas of home lending, activity in this category is still down considerably compared with this time last year (-9.0%).

Along with the direct impact of HomeBuilder on the amount of building work done on the ground, there is evidence that the announcement of the Scheme may be moving sentiment in a favourable direction across the entire housing market, even in those areas not eligible for HomeBuilder support. An example of this is the established home market, where lending volumes rose by some 10.5% during July and stand 6.5% higher than their position 12 months ago.

While the indications as regards HomeBuilder in July’s lending data seem favourable, activity still faces several formidable headwinds. The biggest of these is the deterioration in the Covid-19 situation in Victoria over the past couple of months, as well as the continued absence of inward migration to Australia – the single most important driver of demand for new home building.

Master Builders latest set of forecasts which were compiled at the end of July took all of these factors into account and were predicated on the assumption that the HomeBuilder scheme would boost new home building commencements by almost 10,000 during 2020-21. Despite this welcome support, our expectation is that new dwelling starts will decline to just 124,560 during the current financial year. This would represent a decline of some 27.0% compared with 2019-20. The imperative for heavy government support remains – at least over the short term.

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Shane Garrett

Chief Economist

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