New home financing takes a dive in Canberra

Mortgage commitments have eased, according to the latest housing finance data.

Figures released by the ABS show that the number of owner-occupied loans dropped by 5.6 per cent in the April quarter to 3005 commitments approved in the ACT.

First-home buyers took the biggest dent to participation rate, dropping by 12.1 per cent to 378 buyers hopping onto the property ladder over the April quarter, compared with 430 approved over the same period the year before. 

March experienced a surge in changeover buyers hitting the market, scoring the second highest monthly result on record. The month had 1030 changeover finance commitments approved; the previous peak to activity was recorded in May last year with 1058 commitments.

Despite the activity flurry, overall changeover buyer numbers cooled in the April quarter easing by 4.5 per cent to 2627 loans approved, compared with 2752 approved over the same period the year before.

Of the 3005 loans approved during the April quarter, 444 commitments financed the purchase of new dwellings (defined as homes completed within 12 months of loan application and includes the construction of new residential homes).

Buyers locking in finance for new homes dipped a staggering 18.8 per cent compared with the April quarter last year. New homes accounted for a 14.8 per cent stake in the overall market share during the April quarter, compared with 17.2 per cent the same period last year. 

As anticipated, the established home market accounted for the majority of loans financed.

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Over the April quarter 85.2 per cent of loans financed the purchase of established dwellings (defined as homes completed for at least 12 months prior to loan application); this is a marginal increase from 82.8 per cent during the April quarter last year.

The data illustrates Canberra buyers are more inclined to purchase established dwelling stock, as the proportion of buyers in the market for a new home waned over the month with the established market proportion rising. 

It is important to remember there are significantly more established homes on the market than new homes, even in light of the recent building boom.

Buyers could also be deterred by the premium often associated with new dwellings. Given the strength to house price growth, perhaps the affordability of established stock becomes an attractive alternative.

Purchasers constructing a dwelling borrowed the highest dollar figure at an average of $413,300 over the April quarter.

At a granular level, the data illustrates buyers are forking out more to build, hitting a record high in February this year at $452,600. The loan size for buyers constructing a new home initially broke the $400,000 mark in July 2016.

Buyers that are in the market for an established home appear to be under less financial pressure, with a smaller average loan size of $366,900.

Looking ahead, it is anticipated the value of loans will continue to trend higher as low rates continue to aid the affordability costs of home lending.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell