The number of owner-occupier loans for the construction of new homes in Victoria have been falling quickly and are expected to return to where they were before the sugar hit of the HomeBuilder scheme.

The number of these loans in September 2021 decreased by a further 11.8 per cent from August 2021.

Despite peaking earlier this year, the 12 months to September 2021 saw 25,619 owner-occupier loans to construct new homes. This surpassed the 10-year average by almost 72 per cent.

However, data shows that new home construction loans for investors have continued to soar in Victoria. The volume of these loans has increased by 39 per cent, compared to the three months to September 2021 last year.

The major increase in Victoria is consistent with other states, with particularly large expansions seen in Queensland (+98 per cent) and WA (+78 per cent).

In Victoria, investor borrowing for residential land acquisition has also surged, increasing by 24 per cent from the same quarter last year. There have also been significant increases in borrowing for home renovations for both established and newly built homes (+17.8 per cent).

Master Builders Victoria CEO Rebecca Casson said investor purchases in land suggests further positive gains in investor demand for new home construction jobs into the future.

“Overall, strong levels of investor demand across the property and housing development industry will mean that the pipeline of construction work for the construction of new homes will continue to support our economic recovery,” she said.

“According to the National Housing Finance and Investment Corporation (NHFIC), every $1 million of residential building construction output supports around $2.9 million of industry output and consumption across the broader economy and supports nine jobs across the economy.

“The multiplier effect of our industry will help support the State’s economy as we recover from the effects of COVID-19 lockdowns.

“Even though the volume of loans in some areas of the owner-occupier market is falling back, the average size of loans has continued to increase in response to the rapid pace of house price growth across the State.”

House prices saw increases of 18 per cent in Melbourne and 21.7 per cent in regional Victoria in the year to August 2021.

Ms Casson said the recently introduced restrictions on borrowing brought in by the Australian Prudential Regulation Authority (APRA) are likely to dampen the trend of higher value loans over coming months, as borrowers will now require an interest rate buffer on home loan applications of 3 percentage points (+0.5 per cent).

“This will directly affect affordability because, for some Victorians, this will mean having to purchase a cheaper property or no longer being able to buy a property at all,” she said.

The construction and property industry contributes 59 per cent of the state’s taxation revenue through direct building and property taxes.

Master Builders Australia recently submitted a report to the Inquiry into Housing Affordability and Supply. It highlighted pressures on regulatory changes through the National Construction Code (NCC) and taxes on property such as stamp duty, placing upward price pressures on new and existing homes.

In addition to this, the State Government has also recently introduced legislation for a new Windfall Gains Tax. The Windfall Gains Tax will incur a 50 per cent tax on rezoned land, hitting Victorian families, jobs, and investors at a time where the issue of housing affordability is a pressing concern.

Existing taxes and contributions for Gross State Product, plus the new Windfall Gains Tax, will only further push housing beyond the reach for the average Victorian. 

BACKGROUND: 

The average size of owner-occupier loans for building new homes in the three months to September 2021 was $482,883 in Victoria compared to $478,983 in Queensland, $578,018 in New South Wales, and $618,900 in the ACT.

For housing investors, the average size of loans for the construction of new homes in the three months to September 2021 was $494,678 in Victoria, second only to New South Wales at $606,284.

Worryingly, all states recorded a decrease in the annual change in the number of owner-occupier loans to purchase residential land in the three months to September 2021 compared with a year ago.

Victoria was down 44 per cent, just behind Western Australia (-46 per cent) and Tasmania (-50 per cent).

One area Victoria scored highly in was the annual change in the number of owner-occupier loans for alterations, additions and repairs in the three months to September 2021 compared to a year ago, up 106 per cent.

The average size of the loan for this activity was $210,742 in Victoria.

In comparison, the annual change in the number of housing investor loans for alterations, additions and repairs in the three months to September 2021 compared to a year ago was up 92 per cent in Victoria at $208,095.