New home loans reach third-highest level in almost 20 years

According to the Australian Bureau of Statistics, new housing loan commitments for investor housing rose 13.3 per cent in May 2021 to a high of $9.1 billion.

“The value of investor loan commitments rose 116 per cent in the year to May 2021, after falling to a 20-year low in May 2020,” ABS head of finance and wealth Katherine Keenan said.

“Investor loans equated to 28 per cent of the total value of housing loan commitments in May 2021, compared to 46 per cent in 2015. This reflects the very strong growth in owner-occupier loan commitments over the last year.”

NSW accounted for the majority of investor loan commitments over the period, rising 12.1 per cent and 17.4 per cent, respectively. 

“First home buyer activity remained at high levels in New South Wales and Victoria. However, the number of first home buyers has fallen over the last few months in Queensland, Western Australia and South Australia, following the cessation of HomeBuilder and state government initiatives, such as the Building Bonus Grant in Western Australia,” Ms Keenan said.

Real Estate Institute of Australia president Adrian Kelly said, “Investors and first home buyers alike are diving into the market, with the latter taking advantage of the current government incentives.”

While he cautioned investors that lenders will remain ‘on high alert’ for potential lending restrictions in the future, “APRA has consistently said their true north for changes to current policy settings with be household debt to income with banks showing signs of responding to this in changing some of their products on offer.”

“Despite these strong lending results for investors, feedback on the ground from agents remains that many investors are taking the current high prices to offload investments in light of extensive reforms to residential tenancy laws in some jurisdictions.”

The ABS also noted that new loan commitments for owner-occupiers also rose 1.9 per cent in May to their highest level on record. 

A third consecutive month of loan commitments for residential land and the construction of new dwellings was also recorded. Despite this, the number of loans issued in this corner of the market remains elevated relative to pre-COVID levels.

According to HIA economist Angela Lillicrap, “Confidence in the broader housing market is strong, supported by low interest rates and ongoing house price growth.”

“The strength of the broader housing market is also drawing investors back to the market after being largely absent in 2020,” she said.