Upgraders dominating residential lending activity: QBE Housing Outlook
Since bottoming out in 2011 and 2012 in all states, upgrader demand has strengthened over the last four years and continues to rise, according to QBE's latest housing report.
Upgraders and downsizers have historically represented the largest component of residential demand, being 43% of total residential lending activity in the past 15 years.
This represents two to three times the size of the first home buyer market.
In the year to June 2016, growth in the number of loans to upgraders was 7.1% nationally.
However, upgrader demand varies by state.
Victoria, New South Wales, South Australia, Australian Capital Territory, Queensland and Tasmania saw growth in loans to upgraders during 2015/16.
In contrast, in Western Australia and the Northern Territory the number of loans to upgraders declined in 2015/16, following on from declines in the previous year. Similarly, upgrader loans declined in Tasmania in 2015/16, although this was after growth in 2014/15.
In Western Australia, there was a less significant decline in loans in June quarter 2016, suggesting that the pace of decline is slowing and the market will soon bottom out, whereas in the Northern Territory the number of loans to upgraders experienced a greater annual decline in June quarter 2016.
The ABS provides data on residential investment in terms of the value of total loans rather than the number of loans. As a result, changes in the value of loans over time reflect a change in values for property and purchaser volumes.
All states reported double digit decreases in lending for residential investment in 2015/16 after strong annual rises up to the peak in 2014/15. Year on year declines were still being recorded in June quarter 2016.
Investment lending in Victoria, Queensland, Western Australia and Tasmania recorded the smallest annual decline in investment loans in 2015/16.
The Northern Territory and South Australia recorded the highest decline in lending for residential investment during 2015/16.