Real estate is booming again. A record $20 billion was lent to home buyers in May, a stunning 18 per cent rise on a year ago — shortening the odds of an interest rate rise next month.
Bureau of Statistics figures show an astonishing surge in real estate turnover — by owner-occupiers and investors alike — has pushed lending well above the record set in 2003.
In May alone, borrowers brushed aside the Reserve Bank's rate hike, to lift lending by 4.5 per cent.
While construction lending remained flat, lending to buy existing homes soared by more than 5 per cent in the month, and by 24 per cent in the year.
Financial markets responded by fully pricing in a further rate hike within three months, with a better than even chance of a third rise by Christmas.
The most likely time is when the Reserve Board meets on August 1, six days after the release of the June-quarter consumer price index.
Economist Jarrod Kerr, of JPMorgan, forecasts the figures will show both core and headline inflation above 3 per cent.
Bankers Trust economist Tracy McNaughton said the data added to the case for another rise. "Of greatest concern for the bank is that investors are starting to creep back into the market, while owner-occupied activity is accelerating rapidly," she said.
The statistics across the board are showing the economy on a rising tide.
The Melbourne Institute has lifted its growth forecast for 2006-07 to 3.8 per cent.
Forecaster Mark Crosby said the outlook had improved significantly, even in the past two months.
Nothing is growing faster than home lending.
Borrowing by owner-occupiers to buy existing homes is now 29 per cent or $2 billion a month higher than at the peak of the 2003 boom.
After falling from $7.2 billion to $6.1 billion after the 2003 rate rises, it has swollen by 50 per cent in a little over two years, to a record $9.3 billion in May.
Most of that has been driven by rapid growth in the number of borrowers.
In May, almost 40,000 loans were issued to people moving into existing homes, 33 per cent more than two years ago, suggesting record real estate activity.
Borrowing by investors is also rebounding at an astonishing rate. After almost overtaking lending to owner-occupiers at the peak of the 2003 boom, it sank rapidly, then bottomed, and did not pick up until the NSW Government dropped its controversial exit tax on landlords last August.
Since then, its rise has been meteoric. In May, seasonally adjusted lending to investors buying existing real estate jumped to $5.6 billion, up almost $1 billion or 21 per cent in just nine months, and 6 per cent in May alone — despite the rate rise.
Interestingly, the number of new borrowers has risen more rapidly than the size of loans.
The average loan to owner-occupiers buying existing homes in May was $233,100, 7 per cent higher than the $217,400 a year earlier. There is no sign of that growth accelerating.