Home buyers are diving back into the market as Sydney and Melbourne prices stabilise

JIM SMITH/AFP/Getty ImagesHome buyers have taken the plunge as prices have done the same
  • As home prices begin to find a floor in Sydney and Melbourne, Australians have been borrowing more, with the latest figures showing a 1.3% jump in lending.
  • Australian Bureau of Statistics director Ben Dorber said June marked the first increase in both investor and home buyer borrowing in more than a year.
  • It coincides with the strongest auction clearance rates since 2017, as buyers appear to be returning to ailing property markets and prices stabilise.

As property prices in Australia’s two largest markets, Sydney and Melbourne, start to find a bottom, buyers are beginning to flock back.

The latest figures from the Australian Bureau of Statistics (ABS) show Australians borrowed 1.3% more in June than they did in May, and it’s being put down to the property market.

With prices plummeting in both capital cities since 2017, the month of May saw buyers return to the market as auction sales ticked up to their highest level in 18-months.

“Consistent with recent house price movements, the decline in new lending commitments for dwellings has slowed in recent months,” ABS director of financial statistics Ben Dorber said in a statement accompanying the new numbers.

“In June we saw rises in new lending commitments for both owner-occupier and investor dwellings for the first time in over a year.”

It marks a big turnaround after lending in May dropped 1.6%. Economists point to multiple factors as largely bringing confidence back to the property market including a federal election result that guaranteed the continuation of negative gearing and the loosening of lending standards allowing buyers to borrow more.

With both coming to fruition in May and June, the bounce in lending is perhaps unsurprising. It also suggests that July lending figures could be stronger again, particularly in light of two consecutive rate cuts by the RBA in June and July.

The fact that lending is already lifting caught some analysts by surprise.

“The lift in lending has occurred a month or two ahead of when we had expected,” Commonwealth Bank senior economist Kristina Clifton said in a note.

“It’s early days but it looks like lending for housing might be starting to bottom out.

Looking across the figures though, its clear investors are far less enthusiastic to jump into the market again after being burnt in 2018.

“Investor lending, however, remains well down from its peak and the rise in June was relatively small, up 0.5 per cent,” Dorber said.

Asia-Pacific economist for job site Indeed, Callam Pickering, tweeted that investors, despite still dominating the market, make up a far smaller proportion of the market than they did back in 2015.

The percentage of home buyers meanwhile has grown at a rate not seen since 2009, with first home buyers helping steady the market.

“First home buyer loan volumes were up an encouraging 2%, whilst upgraders were up a more modest 0.4% (month on month) in June,” BIS Oxford Economics economist Maree Kilroy said in a note regarding the release.

In fact, first-time buyers seem to have eagerly been jumping into the market, no doubt encouraged by peak prices falling 10% in Melbourne and 11% in Sydney.

As prices look to be bottoming out, it will be interesting to see whether they now stick around or investors price them out of the market once more.

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