Australian Finance Group (AFG), which has roughly 10 per cent of the mortgage market, says its average new home loan across the state last month was $505,000 – an increase of 6 per cent on the same period last year.
Mortgages with banks and other institutions are also rising in response to a housing market that has been strong all year, especially in Sydney where auction clearance rates have hovered around 80 per cent for the past few months and prices in many suburbs are at their highest levels.
Sydney’s home values have risen 5.4 per cent in the past three months alone, figures from RP Data show. The city looks set to record growth of about 10 per cent for the year.
The Bureau of Statistics’ latest housing finance data for June showed the average size of new owner-occupier home loans in NSW had increased 4 per cent since February, to $341,000. But over the past decade, it had increased more than 50 per cent.
The executive general manager retail at National Australia Bank, Vicki Carter, said there had been a renewed interest in real estate, particularly among investors following the Reserve Bank’s decision to cut rates to record lows last month.
”At NAB, we’ve already seen an increase in customers coming to see us about a home loan and we expect to see this continue,” she said.
Over the past five years, the size of the average home loan with NAB has grown 11 per cent to $313, 594.
Mark Hewitt, AFG’s general manager of sales and operations, said strong house price growth was one explanation for the rise in the size of home loans. Another was the unusually high number of investors who were capitalising on low rates and strong rental growth.
Investors made up almost half those who took out mortgages in NSW with AFG last month (49.5 per cent). This is the highest level of investor activity the company has recorded for any state over the 15 years it has been tracking these figures.
Mr Hewitt said many investors were able to use the equity in their existing property to borrow for a second, third or fourth one.
”With interest rates being so low, affordability is better and with rents being quite strong, they can probably afford to borrow for a better type of property or more expensive property,” he said.
Australian Property Monitors senior economist Andrew Wilson said investors were literally queuing up to buy property in Sydney, particularly the outer western suburbs from Macquarie Fields to Penrith.
This was because yields were high, at more than 5 per cent; there were ”real prospects of short-term capital growth”; rents were rising; and there was an ”under performance of alternative investments”, Dr Wilson said.