The month prior, the average loan size was $608,000 - the previous record was $618,000 in January 2022.

With volumes lower, this implies those who can still service a loan are borrowing bigger amounts.

"While the value of investor and owner-occupier loans fell in the month of December, through the year growth was 20.4% for investor loans and 7.4% for owner-occupier loans," said Mish Tan, ABS' head of finance statistics.

This is against a backdrop of home prices increasing 0.3% in December, and another 0.4% in January, according to CoreLogic figures with prices 8.7% higher than the same time last year after 12 straight months of growth.

Owner occupier refinancing activity is down more than a fifth - to $10.43 billion in original terms - compared to December 2022.

The number of lenders offering cashbacks has also dropped to 10, with four dropping off at the end of 2023.

Credit growth also posted a modest gain over 2023.

First home buyer activity fell 8.4% in December 2023, but is 12.9% higher compared to 12 months ago.

The value of first home lending is 21% higher than a year ago, with the average loan size to this group increasing sharply.

CBA economist Harry Ottley said many first home buyers may simply be fed up with the rental market.

"Lending to first home buyers may have been supported by the extremely tight rental market and consequent higher rents," Mr Ottley said.

"Worsening affordability may also be incentivising first home buyers to act sooner to avoid prices rising further."

A recent InfoChoice survey of more than 1,000 renters found nearly three-quarters (72.7%) of Gen Z were in 'rent stress' - directing more than 30% of their income towards rent.

Over the past 12 months, 41.2% of all renters had seen their rents increase by 10% or more.

With the rental market thought to have forced the hand of many renters into home ownership, Dr Shane Oliver - chief economist at AMP Capital - said this could be supported by the 'Bank of Mum and Dad'.

"I suspect that access to the bank of mum and dad and prior saving buffers have played a bigger role in the upswing in the last year than normal," Dr Oliver told InfoChoice.

"With soft housing finance and housing credit growth and depressed sentiment towards property - as evident in the response to whether now is a good time to buy a dwelling in the Westpac/Melbourne-Institute survey - it's very hard to argue that the rebound in prices over the last year has been a bubble."

Explaining the decoupling between finance and price rises

CoreLogic estimated there were 115,241 dwellings sold over the three months ending January - 11.9% higher than the same period last year and 0.5% above the previous five-year average for this time of the year.

In 2023, CoreLogic estimated there were 488,898 sales nationally. This is -2.8% lower than in 2022.

While Australia's property market has been dogged by patchy levels of listings for the past couple of years, the weakness in credit growth and home lending, and rise in interest rates, has been at odds with the constant upwards trajectory of home price rises.

"It's because overall transactions have been relatively low compared to the last boom – partly reflecting lower listings but also relatively fewer buyers.

"But prices are still determined by supply and demand and while buyer demand has been more constrained with supply constrained too, it's still sending prices up," Dr Oliver noted.

"You could argue that this means that the rebound in prices has come with less conviction than in the past - in share market parlance it's come with less breadth and volume which is often a sign of weakness."

Construction and new home woes point to bigger problem

Within the ABS' data release points to a sustained dearth of finance approved for new home builds.

There were 51,570 loans issued in 2023 for the construction or purchase of a new home - the lowest level since records began in 2002.

“This lack of new work means the pipeline of new housing supply approaching completion is now shrinking rapidly," said Tom Devitt, Housing Industry Association (HIA) senior economist.

“At this rate, Australia will not commence enough housing to meet National Cabinet’s target, falling well short of the 1.2 million new homes they want to see built in the next five years."

Earlier in the week, the ABS released its key construction flow metric for December 2023 - building approvals - which showed approvals for private sector units dropped 25.3%.

Private sector dwelling approvals are 5% below the average annual run rate seen pre-pandemic.

“The population aged 15 years plus has increased by 664,000 over the past year. This has taken the ratio of the new population per dwelling approval to 4.0, its highest level in the history of the data, and well above its long-run average of 1.5," NAB economist Tapas Strickland said.

"Holding all levels of government to account for improving planning regimes, reducing red tape, and supporting the development of appropriate infrastructure and a skilled construction workforce, must be a priority this year," the HIA's Mr Devitt said.

Photo by David Broadway on Unsplash