First home-buyer share rising as total loans flatten out

Australia’s first home buyers continue to improve their position in the housing market, with their share of total loans growing consecutively for the first time in close to five years. In November 2017, newbies were awarded loans valued at AUD3.627 billion, accounting for 13.3% of total loans, which were valued at AUD27.344 billion. Good news in a softening and slowing market, both for first home buyers, but also for the risks in the economy that rose through the now ending housing boom.

Perhaps the largest concern of the Australian Prudential Regulatory Authority (APRA) has been the risks associated with rising personal indebtedness, fuelled by property price speculation through the housing boom and aided by a sustained period of record low interest rates. The nature of that risk is evident in everything from weak retail sales figures, to concerns about the economic impact of even the mildest rise in interest rates.

One measure taken by APRA was to put the brakes on bank lending practices that were driving some house price speculation. We can observe in the chart below that in 2016, when the regulator stepped in to require a reduction in banks lending for investment and on ‘interest-only’ repayment models, that the total volume of new loans slipped back relatively quickly.


To go straight to the dashboard and take a closer look at the data, click here.

It can also be observed that the volume of new loans – displayed in the green line – rose again shortly thereafter. However, there was a different character to most (not all) of these loans. First home buyers – shown on the red bars - started to gain a little more traction and began to increase their share of the total, to the point where the newbies have become the fodder of positive Government press releases for the first time in several years.

There was another factor at play across this period, which can be seen in the second chart. APRA’s efforts, along with the general cooling of the housing boom and some settling of prices, started to deliver a second and more structural decline in the proportion of total loans going to investors.


To go straight to the dashboard and take a closer look at the data, click here.

For the year-ended November 2017, loans to investors accounted for 46.3% of total loans. That is substantial, but it is down from 52 and 53% figures in 2015, and is decidedly on the wain.

It may be a little too simplistic to conflate the rise of loans to First Home Buyers directly with the decline in loans to Investors. There is, after all, a difference between a correlation (there appears to be one) and causation (there may be one, but to one extent is unsure). But what we can certainly say is that regulator’s objectives of broadening the housing debt base and reducing the influence of speculative behavior in the market, appear to be improving and on track for further improvements.