A near-record month for home lending in December has seen the housing and real estate industry turn into 2006 with wind in its sails and record numbers of people taking out loans to buy their own homes.
The Bureau of Statistics reported yesterday that the total amount lent for housing in December was the second highest on record. After seasonal adjustment, Australians borrowed $18.9 billion for housing, up 3 per cent on November's tally, and 11 per cent more than a year ago.
The only month to exceed it was when the rental investment frenzy peaked in October 2003, when investors borrowed $7.5 billion. But, while investor borrowing is now well below those levels, borrowing by owner-occupiers is setting records every month.
In December, it hit almost $13 billion in seasonally adjusted terms, 14 per cent above the high water mark reached in the 2003 boom, and 11 per cent above the level just six months earlier.
A record 37,229 buyers took out loans to buy existing homes for their own use, while another 4423 organised finance to build a home, and a near-record 17,448 home owners dumped their home loan for a cheaper one from a rival lender.
While the housing construction sector is now catching up with the backlog of demand, the figures show that real estate activity is rebounding rapidly. Prices have stabilised, interest rates are still low and appear to be on hold and household incomes are rising.
But while housing is becoming more affordable, it still has a long way to go. The OECD estimated recently that Australian homes are overvalued by 52 per cent relative to the average of other countries, while the US-based monitor Demographia reported last week that houses in Australian capital cities are more expensive than in any other English-speaking country.
Commonwealth Bank economist Joseph Capurso said the high level of borrowing is one reason why the Reserve Bank could maintain its bias towards raising interest rates when it releases its quarterly statement on monetary policy on Monday.
"(The) figures imply that credit - a key RBA focus - continues to grow strongly," Mr Capurso said.
"We have kept a rate rise in its forecast profile, but any move remains unlikely until mid-year."
One thing that will comfort the Reserve, however, is that so far the average value of loans has remained in check. In December, people buying their own home on average borrowed $226,000, up just 3 per cent from the $220,000 average loan a year earlier.
Much of the increased demand is coming from first home buyers. In the December quarter, 32,535 of them took out loans, 27 per cent more than a year earlier, and the highest number since 2002.
Borrowing by investors remains well below 2003 levels, but in December even investor activity hit a 10-month high. Seasonally adjusted borrowing by investors jumped 8 per cent from the September quarter.
