Investment mortgage loan growth outpaced lending to owner occupiers and first home buyers for a third month in July, as well-heeled investors take advantage of record low interest rates and their extra wealth as rising prices put housing out of the reach of younger buyers.
A 1.8 per cent increase in new loan commitments to investors before refinancing pulled the monthly total up to $9.4 billion and offset a 0.4 per cent slip in owner-occupier loans as well as the 7.6 per cent drop in first-time buyer new mortgages, the Australian Bureau of Statistics said.
The loss of incentives for first home buyers such as the government’s HomeBuilder payments and the 18.4 per cent jump in median home prices in the year to August – the fastest rate of growth in 32 years – has cleared the way for investors, with the monthly new loan commitments now double their value of a year ago.
“The tailwind behind investor demand is strong, with further gains for investor lending expected over FY2022,” BIS Oxford Economics economist Maree Kilroy said.
The development industry will welcome the gains, especially any sign that investment capital is going into the off-the-plan market, which will help them get new projects out of the ground.
Pandemic lockdowns in Sydney and Melbourne put at risk the recently emerging signs of recovering investor interest in new apartments and could further shrink the pipeline of new dwellings, commercial real estate agency JLL warned earlier this week.
The latest figures offer little reassurance on that score, however. Investor spending on established housing dwarfs their investment in new dwellings by nine times and spending on established homes is growing faster, Thursday’s figures show.
Over the 12 months to July, new investor loans to buy existing dwellings totalled $66 billion, up 48 per cent on the total a year earlier, while mortgage lending for new housing totalled just $7.3 billion, an increase of almost 22 per cent.
Investors were responding to rising prices and signs that the rental markets of Melbourne and Sydney had passed their worst and regulators were likely to be watching the numbers closely, AMP Capital chief economist Shane Oliver said.
“It… points to a further acceleration in housing debt, a further rise in the share of interest-only loans and increasing lending at high loan-to-valuation ratios,” Dr Oliver said.
“All of which will maintain pressure on the Reserve Bank of Australia and [banking regulator] APRA to move to tighten lending standards in order to head off increasing risks of financial instability – albeit they are likely to wait for the dust to settle from the latest lockdowns before moving.”
Total new home loan commitments were little changed from June, ticking up just 0.2 per cent to a seasonally adjusted $32.1 billion. New owner-occupier loans slipped to $22.8 billion from $22.9 billion, while first home buyer loans fell to $5.8 billion from $6.3 billion in June.
The pull of record low borrowing costs across the board – and a possible sign borrowers anticipate that fixed rates are going to rise – pushed refinancing commitments up 6 per cent to an all-time high of $17.2 billion.
“The value of refinancing between lenders was 60 per cent higher in July 2021 compared to a year ago,” ABS head of finance and wealth Katherine Keenan said.
“This reflected borrowers seeking out lower interest rates, particularly for fixed-rate loans, and cash-back deals across a large number of major and non-major lenders.“
This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/investors-dominate-new-home-loans-as-prices-rise-20210901-p58o0t