New dwellings drive rise in construction loan commitments

Approximately half of the rise in September’s owner-occupier housing loan commitments was for the construction of new dwellings, which rose 25.3 per cent. This followed a 19.2 per cent rise in August.

According to ABS head of finance and wealth Amanda Seneviratne: “Owner-occupier housing loan commitments are at historically high levels, consistent with low interest rates and government incentives.”

“For example, it is likely that the HomeBuilder grant is contributing to increased demand for construction loans.”

In response to the COVID-19 pandemic, the HomeBuilder program was announced by the federal government last June. It provides eligible owner-occupiers with a grant of $25,000 to build a new home, or substantially renovate their existing home. The building contract must be signed prior to 31 December 2020, and construction must commence within three months of the contract date (extended to six months in Victoria).

Looking across states, the value of owner-occupier home loan commitments rose in all states except Victoria and Tasmania.

Victorian owner-occupier home loan commitments fell 8.8 per cent in seasonally adjusted terms, reflecting decreased housing market activity in July and August when COVID-19-related stage 3 and stage 4 restrictions were imposed.

“The fall in commitments for existing dwellings in Victoria was partly offset by a rise in commitments for construction of new dwellings”.

The total number of owner-occupier first home buyer loan commitments rose 6.0 per cent, reaching 13,040 loan commitments, seasonally adjusted.

On the other hand, the total value of loan commitments for investor housing was $5.3 billion, an increase of 5.2 per cent.

The value of new loan commitments for fixed term personal finance rose 8.5 per cent in September, seasonally adjusted, as commitments for vehicles recovered from the fall in August.