New Home Loans Jump As Market Picks Up

Posted on August 29th, 2013 · Posted in News

New home loans approved by banks and other lenders jumped by 28% to $79 billion in the June quarter, amid growing signs of a recovery in the residential property market.

Official figures released today put Australian lenders’ total exposure to residential property at $1.13 trillion, an amount that has increased by 7.3% in the year to June.   The Australian Prudential Regulation Authority said lenders had approved $79 billion in new loans during the June quarter, which was 28% more than they approved in the previous March quarter and 20% more than a year earlier.

The fastest growing category of property lending was to investors, with the value of investment loan approvals surging by 35% to $27.8 billion in the quarter.  Loan approvals for owner-occupiers also grew strongly, jumping 25% to $51.2 billion in the quarter.

The jump comes as auction clearance rates in Sydney hover near record highs.  An economist at JP Morgan, Tom Kennedy, said lending was likely to continue flowing into property investment as the housing market recovered further.  “We’ve got rising house prices and falling interest rates – both of those things are quite attractive for investors. They can get better returns and they can service the debt more cheaply,” he said.

The low returns from bank deposits – which can be lower than inflation once tax is taken into account – are also tipped to drive more investors into the housing market.  Despite the strong growth in new lending, the numbers suggest banks remain conservative in their credit standards.

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