#24: Home Guarantee Scheme Extended, Loan Volumes Rise, Resilient Property Prices, Building Approvals Increase & Slowing Rent Growth

Fresh First Home Buyer Assistance: More Opportunities for Buyers

Good news for first-home buyers and single parents wanting to buy a property: the federal government has issued another 50,000 places in the Home Guarantee Scheme for the 2024-25 financial year.

That Home Guarantee Scheme includes:

• 35,000 places for the First Home Guarantee, which allows eligible first home buyers to purchase a property with a 5% deposit without paying lender's mortgage insurance (LMI)
• 10,000 places for the Regional First Home Buyer Guarantee, which is the same as the scheme above but applies to eligible regional buyers purchasing regional properties
• 5,000 places for the Family Home Guarantee, which allows eligible single parents and single legal guardians to purchase a property with a 2% deposit without paying LMI

Home Loan Volumes Rise 12.1%: Increased Market Activity

Significantly more property buyers have entered the market over the past year, based on the latest mortgage data from the Australian Bureau of Statistics.

The number of new home loans (excluding refinancing) rose from 50,595 in May 2023 to 56,730 in May 2024, an increase of 12.1%.

• Owner-occupier loans rose 5.7%, from 33,641 to 35,572 loans
• Investor loans rose 24.8%, from 16,954 to 21,158 loans

More buyers in the market means more competition, which tends to lead to higher prices. Between May 2023 and May 2024, Australia's median property price rose 8.3%, according to CoreLogic.

Why Higher Rates Haven’t Led to Lower Prices: Market Resilience

When the Reserve Bank started raising the cash rate in May 2022, some commentators said property prices would inevitably fall. But two years on, it's clear the opposite has happened.

In the two years to May 2024, the cash rate increased from 0.10% to 4.35%. At the same time, the nation’s median property price rose 6.2%, according to PropTrack.

So why haven’t higher rates led to lower prices?

PropTrack senior economist Eleanor Creagh said that while rising rates can reduce borrowing capacities and therefore put downward pressure on property prices, other factors influence home values.

“Resilient labour market conditions, strong population growth, tight rental markets, home equity gains, low stock on market and an undersupply of new homes have offset the significant reduction in borrowing capacities and deterioration in affordability that came with substantial interest rate tightening, keeping prices resistant to the falls the calculated shift in borrowing capacities would imply in many markets,” she said.

Building Approvals Rise 12%: Positive Trends but Challenges Remain

There’s been a welcome increase in the number of house-building approvals, although it’s still not enough to keep pace with the demands of our fast-growing population.

A total of 9,163 private sector house approvals were issued in May, which was 2.1% higher than the month before and 12.0% higher than the year before, according to the latest data from the Australian Bureau of Statistics.

Unfortunately, though, as the graph shows, house approvals are still well below the record 14,063 that were issued in March 2021. Also, they’re below the average monthly result (9,311) from the past 15 years.

Unless an increasing number of houses get approved for building – and then actually get constructed – housing supply will continue to fall short of demand. That, in turn, will put upward pressure on prices and rents.

Rents Still Rising but at a Slower Rate: Market Shifts

The median house rent in Australia's combined capital cities jumped another 11.1% between the June quarters of 2023 and 2024, according to Domain.

Significantly, though, the pace of growth slowed noticeably in the most recent quarter, with house rents remaining flat in two cities (Sydney and Perth) and declining in a third (Hobart).

Domain’s chief of research and economics, Dr Nicola Powell, said the rental market was likely to end the year in a more balanced state than it began.

“Many cities are seeing the weakest outcome for a June quarter in many years. It shows that strong rates of rental growth are likely to be behind us,” she said.

“Rental supply is rising. We’ve got investors coming back into the market. The outlook for the next 18 to 24 months is better for tenants than the last two years.”

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