The Federal Government's HomeBuilder program and other similar grants offered in some states could not have come at a better time as the COVID-19 epidemic began to show its impact on the loan market, according to an expert.
Cath Hart, Executive Director of the Housing Industry Association (HIA), said the latest data from the Australian Bureau of Statistics (ABS) shows the early impact of the COVID-19 shock on new home loans.
According to ABS data, loans for new homes in Western Australia fell by more than 17% in April. The state has also issued the lowest number of loans to first-time home buyers in nearly a decade.
"Housing finance data justify when Prime Minister Scott Morrison and Washington Prime Minister Mark McGowan introduced their respective stimulus packages, the HomeBuilding Scheme and the Building Bonus Grant, to support the housing sector. residential construction, "she said. "The data underscores why it is so important that these two job protection programs target home buyers from all walks of life."
Read also: A new impetus for construction for WA
Tim Reardon, chief economist at HIA, said that the latest financial data had not yet shown the full impact of COVID-19. In fact, while activity in the housing market slowed considerably in April, the financial numbers remained high as they reflected the loan applications made in the previous months.
"The modest decline in financial approvals in April reflects the processing delays due to COVID," he said.
Adrian Kelly, President of the Real Estate Institute of Australia, said that the effects of COVID-19 were manifested both by reduced demand for borrowers and by stricter lending criteria.
"What is more worrying is that the ABS says that the operational impacts of COVID-19 suffered by certain credit institutions led to a backlog of housing loan applications in March, which was processed in April, which eased April's drop in loan commitments, "he said.
Although the overall decline in home loans was due to the decline in the homeowner segment targeting established homes, funding for new homes increased 2.9%. In contrast, lending to investors also fell, down 4.2% during the month.
Financing commitments for first-time home buyers also fell 3.8%. Despite this, the proportion of first-time home buyers in all homeowner loans remained high, at 36.7%. Reardon said it was the largest share of first-time home buyers on the loan market since 2009.
"The volume of residential construction activity is expected to decrease during the rest of the year. Various government stimulus packages will be important to mitigate the extent to which this slowdown is weighing on the economy. post-COVID economic recovery, "he said.
Maree Kilroy, economist at BIS Oxford Economics, said the slight delay in approvals may indicate a further contraction in loan data for the month of May. However, we could expect a gradual recovery.
"The easing of restrictions on live auctions and open houses will see new housing loans gradually recover over the next few months," she said. "The recently announced HomeBuilder program will provide material support for new construction loans, but that won't be evident until the end of 2020."
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