The Surprising Rise in Home Loans: What Does It Show Us?

October 8, 2023

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The confidence of both buyers and sellers was recently boosted by the news from the Australian Bureau of Statistics that home loan commitments for dwellings rose 2.5% and dwelling approvals rose 7% in (seasonally adjusted terms) in August. 

And last week’s decision by the RBA not to increase interest rates from 4.10% was the icing on the cake.

The heat is returning to the market!

These figures may still be lower than this time last year - so it might be a tad premature to crack open the Champagne just yet - but they do indicate a trend in the right direction for certain states, with Victoria at the forefront. 

Furthermore, the dwelling approval rise comes despite the construction industry's ongoing recovery from the COVID lockdowns and increasing costs - although, as we know, there are ways to get around them - not to mention the news that several well-known construction companies have gone under. 

Admittedly, the signs of recovery are more evident in our cities, but another sign of renewed confidence in the industry is the drop in the level of refinancing.

Get ready with pre-approval on your home loan

Our sister company, Lending Loop, has felt this change in the right direction. It compares home loans from over 40 lenders including the big banks and specialist lenders and has noticed a higher volume of enquiries and an increase in pre-approvals. 

Like us, their team knows that good preparation is the best strategy when buying a property and they pride themselves on their transparency and ability to secure their members the right loan, at the right price, quickly, and with as little stress as possible.

Surprising Rise in Home Loans

So what does this rise in home loan and dwelling approvals show us?

  1. Spring is in the air. The obvious reason so many sellers list their properties in spring is because property is so much more appealing, bathed in sunshine, and surrounded by the radiant colours of spring flowers and greenery. More stock also means more competition. Whether it is the optimum time for you to sell your property, however, will depend on your personal circumstances as we discussed here.
  2. There is renewed consumer confidence. The drop in refinancing is another indicator that confidence is returning, and with the news that inflation is coming down, employment is high, and interest rates have stabilised (for the time being), buyers and sellers are feeling more optimistic. However, this renewed confidence does depend on where you live because market forces vary in different areas. For example, the changes that certain states are looking at in regard to short-term rental rules could affect their market. 
  3. We’re in an “upturn phase” of the property business cycle – In general, the property market moves in a seven-year cycle, and according to a property update from Michael Yardney, the key characteristics of an upturn phase are “A steady increase in property prices, continued improvement in employment and wage growth, high consumer confidence and optimism leading to increased construction activity and property development.”
  4. Building companies are keen to make hay while the sun shines. Builders understand how the property cycle works and they know that after this phase, the market is likely to enter a “boom phase”. Understandably, they are keen to get new projects underway.
  5. Supply is not meeting demand – The return of migration, both international and interstate, plus a strong job market ensure that there are always people who need to buy which puts pressure on the market. Unplanned life events such as divorce and death also ensure that some vendors may be forced to sell. Many buyers have been waiting for market conditions to settle and with interest rates stabilised for the moment, now seems the right time to make their move.
  6. Low rental vacancy rates are appealing to buyers. In August, the national residential property rental vacancy rate fell to 1.2%. Although this tightening of the market is not great news for tenants, it is encouraging for investors.
  7. Low stock – Low consumer confidence, construction delays, and interest rate increases have led to a decrease in stock over the past year. In simple terms, “This means that at every auction there are bound to be at most four bidders for the same listing out of multiple inquiries, which continues to drive up the price of property,” says agent, Nicholas Scott. This makes the idea of selling far more attractive to vendors and increases the available stock levels for waiting buyers.
  8. Government incentives are working – The market is starting to feel the benefits of schemes such as the Home Guarantee Scheme (HGS); the First Home Super Saver Scheme, and the Help to Buy Scheme. There are also grants, such as the First Home Owner Grant and various stamp duty concessions and exemptions.

To make the most of this phase of the property cycle, Michael Yardney recommends we “Focus on properties with strong owner-occupier demand to benefit from rising prices; to invest in areas with upcoming infrastructure projects or favourable zoning changes or gentrifying suburbs, and to keep an eye on market indicators and be prepared to adjust your strategy as the market shifts. 

“Adjust your strategy as the market shifts”

We agree. We know that in business the early bird catches the worm, which is why we so often remind our members of the importance of staying one step ahead of the competition. 

One obvious way to get in poll position is to seek pre-approval on your loan, and working with Lending Loop is one way to get that and the upper hand in this competitive spring selling season.

Another way is to make sure you’re “in the loop”. Sign up with us today FOR FREE to gain access to our exciting off-market and pre-market listings before everyone else.


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