New home lending falls in Australia as stamp duty costs rise

The number of new home loans being approved in Australia fell slightly in October, down 0.4% month on month and are now 2.4% below a year ago, the latest published data shows.

The number is likely to ease back towards the end of 2017 as fewer new homes are being built, according to the Housing Industry Association (HIA).

‘With a record pipeline of higher density dwellings reaching settlement, home purchase lending is likely to stay at an elevated level,’ said HIA senior economist Shane Garrett.

‘HIA expects that an orderly reduction in new dwelling commencements will become evident during 2017, particularly on the apartment side of the market. Accordingly, the volume of new home loans is only likely to start easing back towards the end of next year,’ he explained.

A breakdown of the data shows that loans for construction and purchase of new homes rose most strongly in Tasmania with growth of 18.2%, followed by the ACT up 12.7%, Queensland up 11.2% and South Australia up 2.1%.

The largest reduction in loans was in Western Australia with a fall of 24.4%, followed by the Northern Territory down 17.6%. There were also falls in New South Wales of 9.1% and in Victoria of 3.8%.

Meanwhile, the latest edition of the HIA stamp duty watch report has revealed that stamp duty is now costing the typical Australian family over $1,200 in additional mortgage repayments each year or $100 every month.

‘The burden of stamp duty has grown much heavier during 2016, with strong dwelling price growth translating into disproportionately larger hikes in the stamp duty bill for home buyers,’ said Garrett.

‘Stamp duty is now setting ordinary home buyers back by an average of $19,975. This eats up home purchase deposits and forces families to take on much larger mortgages, with total loan repayments typically rising by around $36,000 over a 30 year term,’ he pointed out.

‘The cost is even greater when the impact of the higher Lenders’ Mortgage Insurance premiums is added on top. Stamp duty hurts families and acts as a barrier to employment mobility and retirement downsizing,’ he explained.

‘A plan for its removal needs to be at the centre of a national housing affordability strategy. The large states’ coffers have benefitted heavily from the stamp duty windfall in recent years. Perhaps now is the time to offer some relief,’ he added.

Based on dwelling prices during November 2016, the typical stamp duty bill nationally is $19,975 which is an increase of 7.4% on a year earlier. The average stamp duty bill is currently highest in Victoria at $28,538, followed by New South Wales at $24,965 and the Northern Territory at $20,805.

The stamp duty bill on the purchase of a median priced home is $17,960 in the ACT, $15,830 in South Australia and $15,390 in Western Australia while Queensland remains the state with the lowest stamp for a typical purchase at $6,825 followed by Tasmania at $9,135.