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Investors back in the market but owner-occupier lending falls

New investor loan commitments rose for the 12th consecutive month in October, while lending to owner-occupiers dropped by more than $800 million, according to new data.

The Australian Bureau of Statistics (ABS) data also showed the value of total home lending fell for the third month in a row to $29.57 billion, which was a 2.5 per cent drop on September (seasonally-adjusted). 

Despite this, investor lending continued its year-long climb, rising 1.1 per cent, or $109 million, to $9.73 billion, which is the highest level since April 2015.

Real Estate Institute of Australia President Adrian Kelly said it was positive news to see the return of mum and dad investors, who have been especially active in Queensland, South Australia, and New South Wales.

“The housing market has seen significant growth over the past year and it was a sign this sector provided strong returns and future growth in many states and territories,” he said.

While the value of investor loan commitments has grown 90 per cent over the past year, the number of investor loans only accounted for 33 per cent of all new loan commitments for housing in October.” Research Director Sally Tindall said the rise in investor lending was unlikely to be enough on its own, to spur the Australian Prudential Regulation Authority (APRA) to take further action.

“While the value of investor lending is nearing an all-time high, as a proportion of all new loans it’s still a way off from smashing any records,” she said.

“The recent surge in housing stock and the changing sentiment on the back of rising fixed rates could be enough to cool the property market without any further intervention from the government regulators.”

The ABS statistics also show that the value of owner occupier loans fell 4.1 per cent to $19.84 billion in October, with lending to first home buyers dropping 4.8 per cent on September, to $5.19 billion.

Mr Kelly said it was the ninth consecutive month new loan commitments to first home buyers had fallen and this created further fears surrounding housing affordability.

“Of interest is that the drops in the number of owner-occupier first home buyer loan commitments were seen across most states and territories, with the ABS reporting Western Australia saw a massive fall of 13.8 per cent, while Queensland fell by 6.3 per cent and NSW by 4.3 per cent,” he said.

“Small increases were recorded in Victoria, which rose by 1.9 per cent, while the Northern Territory increased by 6 per cent, showing these sectors remain in high demand.”

Ms Tindall said the number of first home buyer loans fell 3.8 per cent in October to be down 29.9 per cent since their January peak.

But she said it wasn’t all doom and gloom, with many first home buyers still getting their foot on the property ladder.

“While proportionally first home buyers are being weeded out, more than 140,000 owner-occupier first home buyer loans have been approved so far this year – that’s more than 4000 more loans than in 2020, with two months worth of data still to come,” Ms Tindall explained.

“That’s no mean feat in what has been a very competitive market.”

Housing Industry Association Economist Tom Devitt said first home buyers were continuing to decline as a share of the market as the impact of HomeBuilder eroded.

But he said the total value of lending for housing in October 2021 was still higher than any month prior to HomeBuilder.

“In the three months to October, the value of lending for housing was 38.1 per cent higher than at the same time the previous year,” Mr Devitt said.

“This ongoing loan issuance continues to confirm that detached home building will remain elevated throughout 2022.

“The boom in renovations also looks set to continue with lending for renovations in the three months to October higher by 108 per cent compared to the same quarter in the previous year.”

The proportion of new fixed loans also dropped to 43.5 per cent in October, down from the record high of 46 per cent in July 2021.

“The drop in the proportion of borrowers opting for fixed rates is not surprising,” Ms Tindall said.

“It comes on the back of months of fixed rate hikes and aggressive cuts to variable rates, which has changed the cost-benefit equation for many new borrowers and refinancers.”

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