Lending for New Homes Jumps from Record Lows to Record Highs

  • Article by: Sally Wood

Record Lending Rates Have Not Yet Peaked, Experts Predict

The HomeBuilder scheme and low interest rates have played a part in pushing loans for new home building to record levels. 2020 has been a rollercoaster of a year for the construction industry. With record low lending levels in May skyrocketing to record highs just months later, it’s hard to know what to expect for 2021. But experts predict the construction industry will move from strength to strength for the foreseeable future.

Lending for New Homes Sees Record High After Record Lows

In May, the value of new loan commitments for housing fell to the lowest levels since the Australian Bureau of Statistics (ABS) began recording this data in 2002. A record level crash in lending and months of declining house prices has been reversed. Just 5 months after these record lows, October saw the highest number of loans for the construction of new residential properties on record. Moreover, loans to first home buyers were at their highest in over a decade. 

The improved consumer confidence can be linked directly to the federal government’s HomeBuilder scheme, which is providing grants of up to $25,000 to eligible owner-occupiers for new builds or substantial renovations.

Low interest rates don’t look to be increasing any time soon either. This has been a further catalyst for the spike in demand for loans to owner-occupiers.

Strong Results Expected to Continue

Angela Lillicrap, an economist at the Housing Industry Association (HIA), says that lending has not peaked yet. Instead, with the recently announced HomeBuilder extension, it’s predicted that these strong results are set to continue into 2021.

“It is evident in today’s data that HomeBuilder has been successful in creating work on the ground in the December quarter and will protect jobs across the economy,” Ms. Lillicrap stated.

The rise in loans to owner-occupiers for the construction of a new home seems steady. In the three months leading to October this year, the rate of these loans increased in every state and territory and by as much as 106% in Queensland.

What Will the HomeBuilder Extension Look Like?

The HomeBuilder extension was announced on 29 November after widespread advocation for an extension across the building community.

The extension will allow eligible owner-occupiers to apply for grants until 31 March 2021, where previously the deadline was 31 December 2020. The scheme will look slightly different for grant applications between 1 January 2021 and 31 March 2021. The changes will include the following:

  • The grant will be reduced to $15,000 from $25,000
  • Victoria’s cap for eligible builds will increase to $850,000
  • NSW’s cap for eligible builds will increase to $950,000
  • Restrictions on builder licensing requirements have relaxed, allowing builders who gained a licence after 4 June 2020 to participate in the HomeBuilder scheme for contracts signed from 29 November 2020
  • Eligible builds must start within six months of any contract signed after 4 June 2020, as opposed to the previous three months

The record high levels of demand are a testament to there never having been a better time to build a new home. The team at Homeshelf have an extensive directory of house plans and builders. That means we can match you with the perfect builder to suit your budget and requirements, so you can start making your new home a reality right away.

Published: 14/12/2020
Author: Sally Wood