Mortgages soar as house prices hit record

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)


Home loans continue to grow at a record pace, driven by enthusiastic demand from first-time buyers even as housing prices hit new highs in the first weeks of 2021.

The risk of an overheating housing market may raise concerns for the Reserve Bank down the track.

But economists do not expect it will be making any short-term changes to monetary policy when its board meets for the first this year on Tuesday.

The Australian Bureau of Statistics said the value of new owner-occupier home loan commitments surged 8.7 per cent to $19.9 billion in December, 38.9 per cent higher than a year earlier.

The number of owner-occupier first home buyer loans rose 9.3 per cent, a 56.6 per cent rise since December 2019.

“Federal and state government measures, such as HomeBuilder, and historically low interest rates are supporting ongoing growth in housing loan commitments,” ABS head of finance and wealth Amanda Seneviratne said.

Demand for mortgages from first home buyers are now at their highest level since June 2009, when similar rapid growth was triggered by the temporary tripling of a first home owner grant to help combat the global financial crisis.

Separate figures show house prices across the nation rose by a further 0.9 per cent in January and now stand 0.7 per cent above the previous September 2017 peak.

Regional property values grew at twice the pace of capital city housing markets, with the divergence more notable in Sydney and Melbourne, which are suffering from the lack of overseas migration.

“Better housing affordability, an opportunity for a lifestyle upgrade and lower density housing options are other factors that might be contributing to this trend, along with the new found popularity of remote working arrangements,” CoreLogic research director Tim Lawless says.

AMP Capital chief economist Shane Oliver believes the Reserve Bank may start feeling a bit uneasy about the pace of the rebound in lending commitments and house prices.

“At the very least it would make sense for home borrower incentives to be wound back in the months ahead and not extended,” Dr Oliver said.

“It will likely remain premature for the RBA to start raising interest rates … given continuing uncertainty and spare capacity regarding the wider economy.”

Still, Monday’s data releases are another sign of Australia’s rapid recovery from last year’s recession.

“The economy is already on the way back and betters the experience of most advanced nations in the world today,” Prime Minister Scott Morrison told the National Press Club in Canberra.

“Australians are now voting with their feet to join the economic recovery,” he added, referring to the unexpected drop in the jobless rate to 6.6 per cent.

But shadow treasurer Jim Chalmers said the prime minister missed the opportunity to set out what he would do for the two million Australians who cannot find a job or find sufficient hours of work.

New job advertising figures suggest further employment gains in the first half of 2021 are likely.

The ANZ jobs ads series rose 2.3 per cent in January, the eighth consecutive monthly increase and are now at their highest level since April 2019.

At the same time, manufacturers have used the usually quiet year-end holiday period to make up for the business lost over 2020 during the recession.

The Australian Industry Group performance of manufacturing index increased by 3.2 points over the past two months to 55.3 points, indicating the sector is expanding.


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