Australia’s housing market sustained strong demand in February, as new home loan commitments surged despite the ongoing impact of the Reserve Bank’s recent interest rate hikes. According to the Australian Bureau of Statistics, the value of new loans increased by 1.5% to $26.4 billion in February. This growth slightly missed analysts’ expectations of a 2% increase.
In the 12 months leading to February, housing finance commitments increased by 13.3%, according to the figures. This rise occurred despite house prices pushing higher due to a post-pandemic surge in migration, which has boosted demand, and a limited pipeline of new housing construction, leading to reduced supply.
The primary driver of the increase was the rise in the value of new loan commitments to owner-occupiers, which increased by 1.6% over the month and 9.1% over the year, according to the seasonally adjusted figures. Despite high inflation and the RBA’s rates policy affecting household budgets, the pipeline of new entrants into the housing market remained solid.
First-home buyers experienced a solid 4.3% increase in new loan commitments in February, up 13.2% from the previous year, according to the figures. This strong gain brought the number of new loan commitments for first home buyers to 9,377 for the month, following a 5.6% fall in January.
NAB senior economist Taylor Nugent noted, “Lending approvals for first home buyers have been broadly resilient, suggesting that in aggregate higher mortgage rates are not proving that much of a hurdle — at least relative to the alternative of renting.”
Property investors also remained resilient to rising cost pressures, with the value of loans to this group climbing 1.2% in February and surging 21.5% year-on-year. Mish Tan, ABS head of finance statistics, highlighted, “This made up over half of the growth in total new loan commitments over the past year.”
Conclusion
ANZ economist Blair Chapman anticipates that the monthly uptick in housing finance will persist in the short term. “Sales volumes have picked up since January, suggesting lending should continue to grow in the coming months,” Chapman said.
Despite claims that the central bank’s most recent rate increase was unnecessary, analysts noted that the rise in new loan commitments demonstrated a muted effect on the property sector. “New loan indicators remain little-changed since October 2023,” stated J.P. Morgan economist Jack Stinson. “The lending data shows little evidence that the RBA’s November hike had a sentiment shock which produced an outsized impact on the housing market.”
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