Melanie Hearse - 26 Apr, 2021

Home loan approvals fall slightly in February 2021 but remain high

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Loan approvals may have dropped in Australia but property prices remain high on the household priority list thanks to Government incentives and record low home loan interest rates. 

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While the latest Australian Bureau of Statistics (ABS) lending indicators show a 0.4% decline in new loan approvals in February, seasonally adjusted, to a total of $28.6 billion, the figure still represents a record high level. It is the first decline since May of last year.

“The value of new loan commitments for owner-occupier housing fell 1.8% in February 2021, although it remained 55.2% higher than in February 2020. The fall in February was driven by reduced loan commitments for existing dwellings, although the value of these loan commitments remained 39.7% higher than in February 2020,” said Katherine Keenan, ABS head of Finance and Wealth.

Unsurprisingly, loan commitments for the construction of new dwellings rose 4.4%, continuing the upward trend in place since July 2020. This is despite reductions in the HomeBuilder grant from the 1st of January 2021. Increased price caps on new build contracts in NSW and Victoria has made the grant access to more purchases.

Ms Keenan noted the time taken to process home loans meant that construction loan applications made in late 2020, prior to these changes, which likely contributed to the loan commitments reported in February.

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Other key highlights from the ABS data showed:

  • The value of new loan commitments for investor housing rose 4.5% to $6.9 billion in February 2021, seasonally adjusted, to be 31.6% higher than in February 2020.
  • The number of owner-occupier first home buyer loan commitments fell 3.3% to 16,117 in February 2021 (seasonally adjusted). This is a rise of 65.8% compared to February 2020.
  • There was a 4.9% fall in New South Wales and a 2.8% fall in Queensland which drove the fall in owner-occupier housing loan commitments nationally. All other states except the Australian Capital Territory rose, with commitments in Victoria rising 4.2%.
  • The value of new loan commitments for fixed-term personal finance rose 1.1% in February 2021 (seasonally adjusted), driven by lending for personal investment which rose 26.1%.

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New build approvals also on the rise

ABS data also indicated the number of dwellings approved rose 21.6% in February, seasonally adjusted, following a fall of 19.4% in January.

“Approvals for private houses increased 15.1% in February, exceeding the previous record-high set in December last year,” said Bill Becker, Director of Construction Statistics at the ABS.

The increase is part of a longer-term trend, Becker saying private house approvals have risen by almost 70% since the Government introduced the Homebuilder grant in June 2020.

Private homes aside, other private sector dwellings such as townhouses and apartments rose by 45.3% in seasonally adjusted terms, coming off a nine-year low in January.

There were some differences in approval rates across all mainland states in February, though all recorded increases. Queensland led the pack at 25.4%, followed by Western Australia (16.7%), New South Wales (14.5%), Victoria (11.1%) and South Australia (4.0%).

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Words by Melanie Hearse

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