The average home loan size of owner occupiers in Australia has increased 7.5 per cent since last July to $408,600, according to new ABS housing finance figures.
First-time buyers across the country aren't too far behind either, as the average value of their house loans was $345,800, which is a 7.4 percent increase from the previous year.
Since July 2017, first-time buyers in New South Wales have been taking out home loans for an average value of $391,700, which is an increase of 6.1 percent from the previous average. This means that first-time buyers are spending even more money to secure a property.
Dr. Nicola Powell, a senior research analyst, stated that the overall trend of larger mortgages in a market that is weakening is a matter for concern, despite the fact that it has slightly decreased since June.
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"Anyone who is experienced in the real estate market is unquestionably being more careful, but first-time homebuyers are really borrowing more along with other buyers," Dr. Powell added.
In a market that is becoming more competitive, that goes against what you would expect to happen.
Dr. Powell hypothesised that more stringent lending restrictions could have eliminated risky borrowers and thin borrowers from the market, thereby providing room for more qualified candidates for loans. According to her, the financing of greater loan-to-value ratios may be contributing to an increase in the amount of the typical home loan.
Aust housing finance commitments up 1.3% for owner occupiers but to refinancing and down 1.3% for investors. Overall remaining weak #auseconpic.twitter.com/lpgtPIJ22X
— Shane Oliver (@ShaneOliverAMP)
September 7, 2018
In the meantime, the amount of capital that investors put into the market took another dip of 1.3% in July of 2018, continuing a declining trend that began in 2015.
According to Dr. Shane Oliver, chief economist of AMP Capital, "As property values have gone down, investors' interest in coming into the market has decreased."
He hypothesised that the introduction of generous first-time home buyer concessions the previous year, such as exemptions from stamp duty and one-time subsidies, might be the cause of the rise in the amount they owed on their mortgages.
“Maybe they’ve been able to afford more expensive property and that’s increased their average loan size and we have seen an increase in first-home buyer share of the owner-occupier market,” Dr Oliver said.
Housing finance to investors is still falling, and owner-occupiers are softening as well pic.twitter.com/uxcUej8WZn
— ANZ_Research (@ANZ_Research)
September 7, 2018
Dr. Oliver predicted that the values of home loans will, at some point, diminish, given that the prices of properties are anticipated to fall by another 10%.
He stated, "Overall, we are seeing a drop in lending commitments."
Up until that point, Dr. Powell had been warning borrowers, particularly those who were purchasing their first home, that they ran the risk of having negative equity and of being unable to pay their mortgage at a time when three of the four major banks had raised their interest rates outside of the normal cycle.
Investor activity accounted for a little under 41% of new mortgage activity in July. The lowest level since April 2011. Everything right now is pointing to further falls in house prices. pic.twitter.com/HaNTEjkbMH
— Callam Pickering (@CallamPickering)
September 7, 2018
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Australian housing market trends report
Highs and lows of the Australian real estate market between 1993 and 2018 are detailed in the Aussie/CoreLogic 25 Years of Housing Trends study. This free research addresses all the major issues in the real estate market today, including but not limited to: property prices, interest rates, home loan sizes, mortgage serviceability, investment, housing affordability, density, and the top growth suburbs.
Housing price growth in Australia over the past 25 years
Strong housing market conditions over the last 25 years have boosted median house values by 412 per cent or $460,000.
There have been five distinct growth cycles within the housing business over the past 25 years, all of which have contributed to an increase in the median value of a national home that is 412 percent more than it was 25 years ago. The ASX All Ordinaries index, on the other hand, has only climbed by a somewhat less impressive 261 percent during the same period of time.
In the year 1995, the national median value of a condominium was $123,840, whereas the national median value of a house was just $111,524. Since 1993, the median value of a house has increased by 412 percent while the value of a unit has increased by 316 percent. This has been very beneficial to homeowners. When compounded over a period of 25 years, annual growth rates of 6.8 percent for houses and 5.9 percent for units are equivalent to increases of $459,900 and $392,000, respectively, in the median value of a typical Australian home and its equivalent in a unit in Australia, respectively. [Citation needed] [Citation needed] [Citation needed] [Citation needed] [Citation needed] [Citation needed]
At the same rate of growth over the next 25 years, Australia’s national property values could rise to $2.9 million for houses and $2.1 million for units by 2043.
Sydney property values would exceed $6.3 million and Melbourne's would exceed $5.8 million if past trends continued for the next 25 years.
The housing market will undoubtedly continue to go through cycles of expansion, contraction, and stable prices. Over longer periods of time, these cycles have been demonstrated to average out the yearly fluctuations in growth rates.
While Melbourne's property market has demonstrated the highest long-term rate of capital growth, it has also had five distinct spells of annual decline in value during the past twenty-five years.
Source: CoreLogic - These median prices have been extrapolated by factoring in the average yearly compound rise in median values over the past 25 years to the current median values of houses and apartments.
Mortgage sizes have increased roughly in line with property values, up 376 per cent or 6.4 per cent per annum.
The average owner occupier loan size has broadly increased in line with dwelling values across Australia, with the typical loan size reaching $388,100 in 2018.
The average size of a mortgage across Australia has increased roughly in line with dwelling values over the past quarter of a century, with the annual rate of increase tracking at 6.4% per annum compared with national house values rising at 6.8% per annum and national unit values rising at 5.9%. The average loan size for owner occupiers across Australia, based on data to March 2018, was $388,100, having increased from just $81,500 twenty-five years ago.
Twenty-five years ago, borrowers in the ACT were holding the largest loans, averaging almost $97,000, however, in today’s market, the largest average loan sizes can be found in New South Wales ($445,500) and Victoria($400,200).
Source: CoreLogic, ABS
Housing affordability is a major issue for many Australians, with borrowers needing to dedicate 135 per cent of their annual gross income to rise just 20 per cent deposit nationally.
Housing affordability pressures are most felt in the markets where home values have risen dramatically: Sydney and Melbourne.
In 2017, the ratio of the price of a dwelling to a household's income reached new highs for all time due to the fact that housing prices increased at a higher rate than household incomes. This downward trend in home affordability was mostly led by the largest capital cities, Sydney and Melbourne, which have demonstrated the most dramatic increase in house value over the past few years. The ratio of the price of a typical Sydney home to the median annual family income is currently 9.3, which indicates that the price of a typical Sydney home is now 9.3 times more than the median annual household income.
Source: CoreLogic, ANU Based on median dwelling prices with an allowance for 20% deposit. Interest rates are based on average standard variable mortgage rates over time as reported by RBA.
Higher density living is increasing, with the average vacant block of land shrinking from 820 square metres nationally to 610 square metres.
Over the past 25 years, more buyers are choosing to purchase a unit over a detached house because of the cheaper price points and often more strategic location.
The rise in property values over the past twenty-five years has occurred against the backdrop of ongoing densification across the nation's capital cities, with higher density housing stock rising to prominence due to changes in town planning policies, changing consumer preferences, and affordability factors. This growth in property values has taken place against the backdrop of ongoing densification across the nation's capital cities. When the last quarter of the last century rolled around, only 22.7% of all home sales across the country were for units. Units account for 29.6% of all sales in the current market, and in some locations where the trend towards densification has been more evident, higher-density homes account for more than 40% of all sales.
Source: CoreLogic The percentage of unit sales is based on dwelling sales over the 12 months ending April 1993 and April 2018, except for Darwin where data commences from 1999.
Melbourne had the largest increase in property values within a capital city over the past 25 years, followed by Sydney and Perth.
Eighty-one of the top 100 fastest-growing suburbs over the previous 25 years were found in a state capital.
The vast majority (41) was actually located in Melbourne with the second highest proportion based in Sydney (25), followed by Perth (12). The pattern follows the broad capital city trend, where metro Melbourne has led the long term growth rate with overall median house prices rising by 8.1% over the past twenty-five years, while Sydney prices were 7.6% higher per annum and Perth prices were up 6.7% per annum.
Source: CoreLogic
Nine of the top 10 suburbs for value growth in the country are located in regional coastal or lifestyle locations, with many performing well above their capital city counterparts.
Based on the median price change between 1993 and 2018, CoreLogic has determined which suburbs have seen the most significant price appreciation over the past twenty-five years.
Despite the majority of Top 100 suburbs being clustered around the two main capital cities, nine of the top ten suburbs were actually situated within regional markets. The median home value in Byron's Suffolk Park has increased from $74,250 in 1993 to $1,185,000 in 2018—an annual rise of 11.7 percent. In terms of median price rise, coastal and lifestyle areas in the South West of Western Australia and the Hunter region of New South Wales were among the top performers among the regional markets, accounting for 6 and 4 suburbs on the Top 100 list, respectively.
Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.
Source: CoreLogic
|
1991
|
$73,700
|
19%
|
|
1992
|
$78,442
|
22%
|
|
1993
|
$84,200
|
22%
|
|
1994
|
$90,242
|
22%
|
|
1995
|
$95,925
|
22%
|
|
1996
|
$99,192
|
22%
|
|
1997
|
$110,075
|
22%
|
|
1998
|
$118,375
|
21%
|
|
1999
|
$133,017
|
22%
|
|
2000
|
$133,000
|
22%
|
|
2001
|
$145,342
|
24%
|
|
2002
|
$160,992
|
19%
|
|
2003
|
$182,733
|
14%
|
|
2004
|
$205,200
|
15%
|
|
2005
|
$215,483
|
17%
|
|
2006
|
$224,383
|
18%
|
|
2007
|
$242,583
|
18%
|
|
2008
|
$257,200
|
20%
|
|
2009
|
$282,117
|
28%
|
|
2010
|
$304,275
|
18%
|
|
2011
|
$303,225
|
18%
|
|
2012
|
$298,608
|
18%
|
|
2013
|
$303,567
|
17%
|
|
2014
|
$324,692
|
16%
|
|
2015
|
$354,850
|
14%
|
|
2016
|
$363,650
|
13%
|
|
2017
|
$374,050
|
16%
|
|
2018
|
$345,800
|
18%
|
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