New Home Lending Halves in Two Years for Record Low

The latest Australian Bureau of Statistics data is painting a picture of the challenges washing through the nation’s residential market. 

The December figures show a fall in new lending with a total of $26.3 billion in new home and investment property loans for the month, down 4.1 per cent on November. It was the first fall in five months. 

The number of loans for new homes in 2023 was at a record low, according to HIA senior economist Tom Devitt. 

“There were only 51,570 loans issued in 2023 for the construction or purchase of a new home, less than half the number of loans issued just two years earlier in 2021,” Devitt said. 

“The ABS has been collecting data on lending for new homes since 2002, and today’s data shows the lowest number of these loans being issued on record,” Devitt said.

“The steepest RBA rate hiking cycle in a generation has compounded the elevated costs of home building, seeing potential home buyers squeezed out of the market and fewer new homes commencing construction.

 “This lack of new work means the pipeline of new housing supply approaching completion is now shrinking rapidly.”

The total number of loans issued for the construction or purchase of new homes in 2023 declined in all states and territories compared to the previous year, led by the Australian Capital Territory (-51.4 per cent) and the Northern Territory (-33.5 per cent), Tasmania (-31 per cent), New South Wales (-30.9 per cent), South Australia (-27.1 per cent), Victoria (-26.2 per cent), Queensland (-21.8 per cent) and Western Australia (-15.6 per cent).

Devitt said the current run rate would not meet the Federal Government’s commitment of 1.2 million new homes in the next five years. 

Volume builders and greenfield developers enjoyed a boom in recent years spurred by the pandemic and the HomeBuilder grants. But the hangover is starting to wash through the market now. 

Canstar lending expert Steve Mickenbecker described last month’s recovery in lending figures as a “false dawn”.

“Housing prices reported by CoreLogic show a strong recovery over 2023, to the point where Brisbane, Perth and Adelaide are at 2021 highs. But the softening over the past couple of months in the biggest markets in Melbourne and Sydney suggests that demand is off in spite of rental and immigration pressures,” he said. 

“The decline in inflation for the December quarter should lift the lending market this year, boosting buyer confidence that they no longer have to anticipate a further rate increase and just have to show a little patience for a rate cut later in the year.”

Owner-occupier loan commitments fell 5.6 per cent, while investor loan commitments fell 1.3 per cent in December. 

ABS head of finance statistics Mish Tan said, “While the value of investor and owner-occupier loans fell in the month of December, through the year growth was 20.4 per cent for investor loans and 7.4 per cent for owner-occupier loans”.