Housing leads the way

Australia’s housing market continues to lead the country’s economic recovery with Australian Finance Group (ASX:AFG) brokers lodging a record $20.6 billion in home loan applications for the third quarter of FY21. This represents a 3.79% lift on the prior quarter and a significant 34.32% increase on the same period last year.

AFG CEO David Bailey explained the results: “Record low interest rates, effective government stimulus packages and an improving consumer outlook have contributed to increased activity.

Looking around the country, New South Wales lodgements are up 9.37% on last quarter and 40% on Q3 FY20. Victoria is up 6.60% on last quarter and 24.86% on Q3 FY20. “Historically, Q3 usually records slower growth than Q2 so the solid results in NSW and Victoria are even more impressive.

In South Australia, lodgements are up 1.51% on last quarter and up 33.88% on the same period in 2020. In Western Australia, lodgements are down 7.61% on the previous quarter, which was its strongest period since 2015. Lodgements in WA are up 45% on Q3 FY20. The Northern Territory is up 5.79% on last quarter and down 13.26% on the same period last year. Queensland is down 2.66% on a very strong prior quarter and up 37.38% on Q3 2020.

“Rising house prices have contributed to a fall in Loan to Value Ratios (LVR), the national average LVR is down from 73.3% to 71.9%. The national average mortgage size has increased by 5.9% to $574,948 however rising house prices are outpacing loan sizes and maintaining safety buffers, as reflected in the reducing LVRs.

“Highly competitive fixed rates, largely driven by the Big 4 banks’ access to cheap government funding has seen borrowers locking in their mortgages, with the percentage rising from 29.3% to 34% for the quarter.

First Home Buyer (FHB) activity has slowed, down from 22% to 18%, but this figure is still historically high. “The state and federal government FHB incentive schemes have done their job and likely pulled forward some demand,” said Mr Bailey. Refinancers are steady at 22% and the percentage of Upgraders has lifted from 42% to 43%.

“With interest rates at record lows and yields slowly improving in some markets, Investors are edging back into the market, with an increase from 21% last quarter to 23%. The longer-term average for Investors’ share of the market is around 35%.

“Interest Only lodgements are up from 12% to 14%, however these are still historically low as borrowers take the opportunity to pay down the principal during this period of record low interest rates.

The Big 4 Banks and their stable of brands captured 57.1% of the market, which is down from a high of 66.8% in the final quarter of FY20 which coincided with the peak of nationwide lockdowns. NAB was the only one of the Big 4 and their brands to record an increase in market share while the others all lost ground. Notable movements amongst the non-majors were AFG Home Loans up from 7.76% to 9.10% and Macquarie down from 11.45% to 9.93%.

“With such a competitive lending market and increased market activity, lender turnaround times continue to rise, up from 25.2 days last quarter to 27.1 days. This is the highest it has been at any point over the last three years.

“As our country recovers from the disruption of the pandemic, a resilient housing market built on sound lending standards will help keep Australia’s recovery ahead of many of the world’s economies,” he concluded.

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