Housing Industry Association economist Angela Lillicrap said the federal government’s HomeBuilder grant for new home builders was the “catalyst” for improving consumer confidence.
The grant was due to end in December, but instead dropped to the lower rate of $15,000 for the first three months of the new year.
Ms Lillicrap said this would “see the strength in housing finance data extend into 2021”.
“It is evident in today’s data that HomeBuilder has been successful in boosting confidence in the market and creating work on the ground,” she said.
Commonwealth Bank of Australia associate economist Nicolas Guesnon also expects demand to remain high this year, saying in a research note that various state government incentives were helping to bolster the surge in borrowing on the back of HomeBuilder.
First-home buyers are at their highest level by number since 2009, when the first-time buyers’ grant was tripled during the global financial crisis.
However investors are largely staying out of the market, which Mr Guesnon said was due to headwinds including higher vacancy rates, falling rents for apartments and weak population growth.
In Victoria, loans for borrowers building a new home increased 71 per cent, while in NSW there was a 43 per cent rise.
Western Australia, Queensland and the Northern Territory recorded the biggest increases in loans to home buyers for the construction of new buildings, with a surge of more than 125 per cent.
However, CommSec senior economist Ryan Felsman warned the rapid increase in activity could raise concerns about the levels of debt on the household balance sheet.
“It won’t be long until ballooning mortgage debt is again on the radar of Aussie policymakers,” Mr Felsman said. “In NSW, Queensland, Western Australia and Tasmania, the average mortgage size for an established home stands at record highs.”
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.