Home loan money dips but property prospects are up

Photo: Naomi Hebert

With the property scene more subdued in recent months, it stands to reason that the volume of home loan dollars is also down.

Lending for property purchases fell -4.4% over the month of June, according to property data firm CoreLogic. Each borrower segment saw a decline in value, with investor lending falling by -6.3%, and owner occupier lending down -3.3%. First homebuyer lending declined -10.0% in the month.

Part of the story is rising interest rates. Variable home loan interest rates have been going up across the board in line with the rising cash rate, while some fixed home loan rates have jumped too, as lenders anticipate continued rate rises by the Reserve Bank. These moves have clearly deterred some borrowers.

And yet these figures alone shouldn’t determine how you view buying a home right now because there are also many more properties available for sale.

In fact, REA Group's Prop Track data shows there have been more new listings nationally across the first half of the year than during any year since 2015. This generally means there are more properties available to potential buyers and subsequently a chance to get a fair price - or at least a lower price than in recent years.

A more even property playing field

Equally important is that buyer demand has declined this year and it's taking longer to sell homes, according to Prop Track. This is somewhat reflected in the lower auction clearance rates of recent months.

CoreLogic says that sales volumes have been easing nationally, though have been steady when compared to 2021's disrupted market. CoreLogic notes that initial sales numbers over the three months to July were 16% lower than the same quarter in 2021.

The data also confirms that properties are taking longer to sell and that in the three months to July, the median number of days on market was 32, up from a recent low of 20 days over the three months to November.

Furthermore, this has resulted in better prices for buyers, by CoreLogic’s numbers. They note that discounting has improved and in the three months to July, the median vendor discount at the national level was -3.8%. That's about 1% better than a year ago.

The inference here is that a prospective first-time buyer might have a chance to break into the market, generally speaking, securing both a price and a home loan amount that's more manageable than in the recent past. Of course, rising interest rates will impact some of that increased borrowing capacity and buyer confidence.

Home buying ebbs and flows

It’s also worth noting that the property market is fluid and varies by location, so this broad narrative won’t stay the same for long.

Prop Track reports that the "fundamental drivers" of demand remain strong. So what are they? These are things like unemployment which is still very low and potential wage growth. International migration is said to be increasing as well. These factors combined lead some experts to think various property markets will soon bounce back up.

"As we look towards the spring selling season, activity in property markets around the country is expected to pick up over the next few months in line with the typical seasonal peak in activity," Prop Track's latest report says.

Still, with some research on property prices in your preferred area and by comparing home loans, you might just get ahead of the typical pre-spring property activity. Mozo also has a handy home loan calculator to help you get started.