Record Level of Lending for New Home Builds

  • Article by: Sally Wood

More loans for new home construction were granted in November 2020 than ever before, revealed in the latest numbers released by the Australian Bureau of Statistics.

The amount of loans given to owner occupiers in the period from August to November was 83.7% higher than the same time the previous year, demonstrating a staggering jump in the number of new homes that will be built in 2021.

Additionally, the number of loans for the purchase of land is up by 99.2%, compared to the same period in 2019.

“The number of loans for the construction of a new dwelling rose for the sixth consecutive month in November to reach a new record,” stated Angela Lillicrap, Economist at Housing Industry Association (HIA). The figures are the highest recorded since the data started being collected in 2002.

Increase in Lending Attributed to HomeBuilder Program

The increase in confidence within the housing market can largely be attributed to the federal government HomeBuilder grant, which was introduced to support the construction industry during the worst of the COVID-19 pandemic. The loans provide grants of up to $25,000 to eligible owner-occupiers for new builds or substantial renovations. Originally due to expire at the end of 2020, the program has been extended to allow applications until 14 April 2021.

“It is evident in today’s data that HomeBuilder has been successful in boosting confidence in the market and creating work on the ground,” Ms Lillicrap said.

Low Interest Rates Lead to Higher Consumer Confidence

However, other factors are also at play in the rise in new home building. Low interest rates are also contributing to the increase in loans. First home buyers are taking advantage of the favourable lending environment to purchase their first property, with loans to first home buyers accounting for 42% of the total number of owner occupier loans issued in November.

Additionally, investors are beginning to return to the market. Ms Lillicrap notes that “the value of lending to investors is up by 3.7% for the three months to November 2020 compared to the same time last year”.

Growth Across the Country

All states and territories experienced growth in the final months of 2020, with the largest increase in the number of loans to owner-occupiers for the construction of a new dwelling occurring in Western Australia (an increase of 144.4%).

High numbers were also seen in Queensland with 128% growth, and the Northern Territory with 127.6% growth. The south-eastern states had lower increases but still experienced a rise in the number of loans, with Victoria up 71.2%, South Australia 53.1%, Tasmania 45.8%, and New South Wales 43.2%.

High Loan Approvals Expected to Continue

Moving forward, it is expected that loan approvals will continue in high numbers. “HIA New Home Sales data suggests that detached housing finance approvals will continue to be strong over the coming months. The extension of HomeBuilder at the end of November is not a factor in this month’s result but will see the strength in housing finance data extend into 2021,” Ms Lillicrap stated.

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

Published: 22/01/2021
Author: Sally Wood