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Real Estate SecretsRecord High Home Loan Borrowing Across Australia, Except Victoria
In a trend sweeping across Australia, home loan borrowing has surged to unprecedented levels, setting record averages in most regions, with one notable exception being Victoria. Recent data reveals a significant spike in the average new loan size for owner-occupiers nationwide, reaching a record high. The Reserve Bank of Australia’s upcoming board meeting has heightened expectations for a potential rate cut, with the current rate standing at a 13-year peak of 4.35 per cent.
The Australian Bureau of Statistics (ABS) reports that the average loan amount in the December quarter soared to $666,000, a substantial increase from a decade ago. This surge in borrowing coincides with a 1.1 per cent quarterly growth in house prices across major cities and a 3.8 per cent increase in regional areas, as indicated by Domain’s latest house price report.
Across the country, a staggering $54.8 billion in new owner-occupier loans were approved, marking a notable $2.2 billion rise from the previous quarter and a $6.2 billion increase compared to the previous year. However, Victoria stands out as the sole state where the average new owner-occupier loan did not hit a record high, with the average loan amount at $632,000, ranking fourth behind New South Wales, the Australian Capital Territory, and Queensland.
Experts attribute Victoria’s stagnant loan size to a decline in property prices within the state and broader economic factors influencing the region. Conversely, other states experienced substantial growth in average loan amounts, with Western Australia leading the pack with a nearly 20 per cent surge to an average loan of $599,000. New South Wales residents borrowed a staggering $811,000 on average, followed by Queensland at $635,000, South Australia at $580,000, and the Australian Capital Territory at $650,000. In contrast, Tasmanians and Northern Territory residents borrowed relatively lower amounts at $473,000 and $465,000, respectively.
The steady increase in loan sizes is primarily attributed to soaring property prices, defying the series of rate hikes by the RBA over recent years. While investor lending experienced a slight decline in the December quarter, investors continued to dominate the borrowing landscape throughout the year, with new investment loans reaching $125.1 billion in the 2024 calendar year, a substantial increase from the previous year.
For first-home buyers, the market remains challenging, with a marginal uptick in new loans in the December quarter. Despite the pressure on this segment of buyers, the slight retreat of investors from the market presents a potential opportunity for first-time homeowners to enter the property market.
Looking ahead, the prospect of rate cuts poses uncertainties for the borrowing landscape. While experts anticipate a potential boost in market confidence following rate cuts, the long-term implications on borrowing capacities and property prices remain unclear. The evolving dynamics in the home loan sector underscore the intricate interplay between economic factors, lending practices, and market trends, shaping the landscape for prospective homebuyers across Australia.
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