Home renovation loan sizes

Master Builders Victoria (MBV) analysis of monthly lending figures for December 2021 show that Victorian borrowings for home renovations jobs remains very high. However, the average size of the loans has started to shrink quite substantially over recent months—both for investors and owner-occupiers.

During the last three months of 2021, the number of loans to owner-occupiers for home renovations was 77.8 per cent higher than a year earlier, with the pace of growth even stronger for investors (+87.2 per cent). In contrast, the typical home renovations loan size has become smaller in Victoria over recent months.

During November 2021, Victorian owner-occupiers borrowed an average of $225,418 in home renovations loans. This fell back to $212,980 during the December 2021 quarter. A similar trend has affected investors.

Master Builders Victoria (MBV) CEO Rebecca Casson said it was surprising that renovations loans are getting smaller given materials and trades costs are rising quickly.

“It may be that there is some nervousness amongst consumers about the amount of borrowing they take on for renovation work,” Casson said. “This is because speculation has increased about interest rate increases.

The RBA has repeatedly pledged not to increase its cash rate until inflation has settled firmly into the two per cent to three per cent band.

Outside of home renovations loans, Casson said investors were continuing to take a bigger bite of the market at the expense of owner-occupiers. The housing investor share of loans for the purchase of residential land was particularly large (30.5 per cent) during the December 2021 quarter.

Investors accounted for a slightly smaller share of loans for new home construction (27.2 per cent), new dwelling purchase loans (27 per cent), and loans for home renovations (27.7 per cent).

Home renovations are the strongest area of owner-occupier lending, with loan volumes here up by 78 per cent a year earlier.