New home loans approved by banks and other lenders jumped by 28 per cent to $79 billion in the June quarter, amid growing signs of a recovery in the residential property market.
Official figures released today put Australian lenders' total exposure to residential property at $1.13 trillion, an amount that has increased by 7.3 per cent in the year to June.
New lending, however, is expanding much more quickly than the banking sector's total exposure to property, because many borrowers are using low interest rates to pay off their debts more quickly, taking older loans off banks' books.
The Australian Prudential Regulation Authority said lenders had approved $79 billion in new loans during the June quarter, which was 28 per cent more than they approved in the previous March quarter and 20 per cent more than a year earlier.
The fastest growing category of property lending was to investors, with the value of investment loan approvals surging by 35 per cent to $27.8 billion in the quarter.
Loan approvals for owner-occupiers also grew strongly, jumping 25 per cent to $51.2 billion in the quarter, during which the Reserve Bank lowered the cash rate by 0.25 percentage points.
The jump comes as auction clearance rates in Sydney hover near record highs, re-igniting the debate about the risk of a bubble in Australian property led by speculative investors.
An economist at JP Morgan, Tom Kennedy, said lending was likely to continue flowing into property investment as the housing market recovered further.
"We've got rising house prices and falling interest rates – both of those things are quite attractive for investors. They can get better returns and they can service the debt more cheaply," he said.
The low returns from bank deposits – which can be lower than inflation once tax is taken into account – are also tipped to drive more investors into the housing market.
Despite the strong growth in new lending, the numbers suggest banks remain conservative in their credit standards.
The share of new housing approvals that are "low doc" loans has fallen to 0.7 per cent in the quarter, compared with 1.1 per cent a year earlier.
The percentage of new mortgages where the loan is worth more than 90 per cent of the property value has also fallen slightly in the past year, from 14.4 per cent to 13.4 per cent.
The APRA figures also showed banks' exposure to commercial property has increased by 2.5 per cent in the past year to $213 billion.