Investor home loans decline for the first time in close to 2 years
While the number and total value of new investment loans declined in the December 2024 quarter, the average home loan size instead continued to grow over the period.
The Australian Bureau of Statistics (ABS) lending data for the December quarter of 2024 revealed that the number of new investment loans for dwellings fell over the period, marking the first fall since the March quarter of 2023.
The ABS observed that 48,876 new investment loans were approved over the December quarter, representing a 4.5 per cent fall compared to the previous quarter.
While the total value of new investment loans also registered a quarter-on-quarter decline, falling 2.9 per to $32.4 billion, the average loan size instead significantly rose by $25,065 to $674,316 over the period.
ABS head of finance statistics, Dr Mish Tan, explained that the December quarter fall in the value of new investment loans “followed a record high of $33.4 in the September quarter” which was “slightly higher than the COVID-19 peak in March 2022”.
Despite the quarterly decline, Tan said that “the value of new investment loans during the 2024 calendar year in original terms reached $125.1 billion”, registering “29.8 per cent higher than the $96.4 billion value of new loans in 2023”.
Tan also noted that the average size of investment loans rose compared to this time last year, increasing 7.9 per cent despite “some moderation in house prices over the second half of 2024”.
Over the calendar year of 2024, the strength in investment loans was driven by NSW (+29.3 per cent), Queensland (+40.9 per cent), Western Australia (+55.9 per cent) and South Australia (40.7 per cent).
With the exception of South Australia, these states registered the strongest falls to investment loans during the December quarter.
Home loan growth stays strong
Over the December quarter of 2024, there were 83,206 new home loans approved, marking a 2.2 per cent rise compared to the previous quarter, which represented the third consecutive quarter of growth for home loans (excluding refinancing).
Even though the number of new home loans increased over the December quarter, Tan noted that “New South Wales partially offset this growth, falling 2.3 per cent, following a fall of 0.4 per cent in the September quarter”.
The total value of new home loans approved registered a rise of 4.2 per cent to $54.8 billion compared to last quarter, with the average loan size increasing by $24,777 to $665,978.
Tan commented that “demand for new home loans excluding refinancing rose throughout 2024, despite relatively strong growth in property prices”.
“In original terms, the value of new home loans during the 2024 calendar year reached $205.7 billion. This was 13.6 per cent higher than the $181.0 billion value of new loans in 2023,” Tan said.
Across the nation, the largest increases in value occurred in Queensland (+19.6 per cent), Victoria (+12.3 per cent) and NSW (+10.6 per cent).
Commenting on the ABS lending data for the December quarter of 2024, Housing Industry Association (HIA) economist Maurice Tapang said: “Investors have been active in building new homes in this cycle, and increasingly owner-occupiers have been slowly returning to market as well”.
With the Reserve Bank of Australia set to give the first cash rate decision for 2025 on 18 February, Tapang noted that “investors have been key early in this cycle in adding to new housing supply and increasing the volume of properties available for rent”.
“As is typical of cycles of rising interest rates, the first to return to market are investors followed by trade-up owner-occupiers, first home buyers and increasingly those building a new home,” Tapang said.
“Even without a cut to the cash rate, home buyers of all types, from investors to first home buyers and non-first home buyers, have already started coming back to the market.”