IN CHARTS: building back the housing market

If lending continues at this pace, the Australian Prudential Regulatory Authority (APRA) may consider more measures to slow it. 

"Owner occupier lending shot up 5.3 per cent month-on-month in December and is now only 4.1 per cent lower than its extraordinary peak in May 2021.”

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Owner occupier lending shot up 5.3 per cent month-on-month in December and is now only 4.1 per cent lower than its extraordinary peak in May 2021. Investor lending increased 2.4 per cent month-on-month and has been growing steadily since late 2020.

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The average new first home buyer loan size was $A481,000 in December 2021, up 11 per cent year-on-year from $A433,000 in December 2020.

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Residential building approvals also grew rapidly in December (+8.2 per cent month-on-month) due to very strong growth in unit approvals (+27.5 per cent month-on-month), though total approvals in the fourth quarter of 2021 were lower than the third quarter.

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New South Wales units increased 121 per cent in December and were the main driver of strength. Unit approvals also rose in Queensland (+8.4 per cent month-on-month) and South Australia (+26.8 per cent month-on-month) but fell in other states. House approvals fell across New South Wales, Victoria, Queensland, South Australia and Western Australia (seasonally adjusted data not provided for Tasmania, Northern Territory or Australian Capital Territory).

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The popularity of working from home and low rates are supporting building approvals. A cash rate hike, expected in September 2022, will reduce borrowing capacity and could slow activity, though even after one or more increases in the cash rate, the borrowing environment remains broadly supportive. ANZ Research expects the cash rate to increase to 0.75 per cent by the end of the year and 2 per cent by the end of 2023.

Adelaide Timbrell is Senior Economist at ANZ