Record-low interest rates and government stimulus, such as the HomeBuilder grant, has motivated exceptional multinational rises in the construction industry.
The Housing Industry of Australia’s New Home Sales Report revealed that December 2020 was the strongest month in the survey’s 20-year history.
HIA economist Angela Lillicrap said the extension of the HomeBuilder grant to allow contracts to be signed before March 2021 with a grant of $15,000 further supports the sales of new homes into 2021 and beyond.
“The number of construction loans to owner-occupiers in the three months to January 2021 is 45.8 per cent higher than the previous quarter and is more than double the same time the previous year.”
COVID helps to build savings and redirect spending
The recurring COVID lockdown periods of 2020 had a positive effect on increasing financial savings and realigning patterns of spending, says Ms Lillicrap.
“Households have changed their spending habits in response to the COVID-19 interruptions. Many have diverted funds that would have typically been spent on travel and entertainment into improving their homes.
“Lending for renovations also continue to be elevated. The value of loans for alterations and additions in the three months to January 2021 is 40.8 per cent higher than the same time the previous year.
“Investors are also returning but were more active in the market for established dwellings.
The value of lending to investors increased by 17.6 per cent in the three months to January 2021 from the previous quarter.”
Future looks bright for detached housing
Major changes to our living, spending and saving habits, as well as social and demographical influences, denote further demand for standalone housing.
“Low-interest rates, rising house prices, higher savings and a demographic shift in demand towards detached housing and regional areas should ensure ongoing demand for new homes into 2021,” Ms Lillicrap concludes.
Across the states, the number of loans to owner-occupiers for the construction of a new dwelling in the three months to January 2021 compared to the same time last year has tripled in Western Australia (up 221.7 per cent) and more than doubled in Queensland (up 164.9 per cent), the Northern Territory (up 160.3 per cent) and Tasmania (up 104.2). Victoria (up 97.1 per cent), the Australian Capital Territory (up 87.4 per cent), South Australia (up 82.6 per cent) and New South Wales (up 72.9 per cent) also recorded strong results.
Across the Tasman
Since the COVID pandemic, New Zealand property prices have risen by about 20 per cent, with its largest city, Auckland, recording a 25 per cent increase.
Economists say that lower interest rates have seen the housing market markedly outperforming expectations.
Despite managing record mortgage debts before the boom in New Zealand and Australia, the former is one step ahead.
The Reserve Bank of New Zealand has had limits on low deposit (high loan-to-valuation ratio) loans since 2013. It remains to be seen if Australia will follow suit.
(Source: Mortgage Business, ABC)