housing finance

Strong Growth in Housing Finance

There is only good news for the field of housing finance, as the money continues to flow in this direction.

Even though a clampdown on lending to investors has been announced since December 2015, the housing market is still booming. This happens mainly because the clampdown applies only to local investors while the foreign ones continue to have a powerful influence in the field. In fact, the strong growth in housing finance is due to foreign investors.

Housing Finance – What does the statistic reveal?

This growth in housing finance is confirmed by data, such as the one announced by the Australian Bureau of Statistics at the beginning of this week. According to them, the number of approvals for housing loans increased by 4% in February. These approvals do not include any refinancing of current loans.

However, the value of the housing loans has decreased by 6% from July 2015 until now. The good news is that from January until now, the value was adjusted from $25.80 billion to $25.74 billion.

Loans for new houses together with loans for to-be-build houses are no more than 15% of the total value of housing finance, but they still represent an essential part of this industry.

At the moment, the housing finance in Australia doesn’t present an extreme growth, but it is a significant one. We are no longer facing a slump. As the statistics suggest, housing constructions will contribute to the economic growth in 2016. It is true that it may be a modest contribution, but this also counts a lot for the Australian economy. Last year, the rise in GDP was 3%. The field of housing finance – for both renovation and construction – contributed to this increase with 0.5%, which is one-sixth of the total growth. This is a considerable percentage, mainly because this field represents no more than one-twentieth of the Australian economy.

Taking all these aspects into consideration, we have all the reasons to believe that the contribution of housing finance to the economic growth of this year will be noticeable, too.

What is the value of the foreign investment?

As it was mentioned above, foreign investments have an important part in the growth of the housing finance. Last week, the Foreign Investment Review Board published the annual report. In 2014/15, the value of investments approved by the FIRB presented a remarkable rise, from $17.16 billion in the former year to $60.75 billion. By comparison, foreigners are allowed to invest more, as they benefit from a higher approved value of housing finance. In fact, the total amount of money equals one and half months of loan approvals to Australians.

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