Home lending rises - again

Posted on 12/07/2011  

Lending to home-buyers rose 4.4% in May after a 4.6% rise in April, creating optimism about the future of the nation’s property markets.

One month of positive data means little but two consecutive strong months suggests a trend may be emerging – and bank lending is now at its highest level in two years. The June figures will make the situation clearer.

Data from the Australian Bureau of Statistics (ABS) shows that the value of loans to home-buyers rose 2.2% in May after a 6.7% rise in April.

The value of loans to investors also rose, up 4.4% in May, and there was also a substantial rise in loans for people building or buying new dwellings. This reverses a recent downward trend, so we will need to see data from a few more months to draw any meaningful conclusions.

Here’s how one media outlet rationalised the figures: “Just how much of the recovery represents pent-up demand for loans, after floods and cyclonic weather kept home-buyers indoors earlier in the year, is unclear. If the recent gains are in part the easing of a backlog, then the likelihood is that lending will ease back in the next few months.

“Alternatively, the gains of the past month or so may be the start of a renewed upward trend.”

That seems reasonable to me. My guess is that we are seeing the beginnings of a recovery, which is what many property analysts predicted early in the year. The first half of 2011 was always likely to be flat, with signs of recovery in the second half.

We have now had eight consecutive months without an interest rate rise, we will soon see the impacts of the upturn in the resources sector flowing through to other sections of the economy and the uncertainty created by a carbon tax policy without detail has been removed by Sunday’s announcement of how it will work.


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