Investor housing loan commitments reach new high

“The strength of the broader housing market is drawing investors back to the market after being largely absent in 2020,” according to Housing Industry Association (HIA) economist Angela Lillicrap.

Looking into states and territories, Victoria and NSW saw the largest monthly increase in investor loan commitments at 17.4 per cent and 12.1 per cent, respectively.

Over the year to May 2021, investor loan commitments rose 116 per cent following a 20-year low in May 2020.

Even with the surge, investor loans still only accounted for 28 per cent of the total value of housing loan commitments this month – far lower than the 46 per cent reported back in 2015.

“This reflects the very strong growth in owner-occupier loan commitments over the last year,” according to ABS head of finance and wealth Katherine Keenan.

Weighing in on the latest data, Real Estate Institute of Australia (REIA) president Adrian Kelly did counter that even despite strong lending results for investors, “feedback on the grounds from agents remains that many investors are taking the current high prices to offload investment in light of extensive reforms to residential tenancy laws in some jurisdictions”.

New loan commitments for owner-occupiers rose 1.9 per cent to $23.4 billion – the highest level on record.

And while the number of loan commitments to owner-occupier first home buyers fell 0.8 per cent, it remained at record-high levels, ultimately accounting for 32.7 per cent of all owner-occupier commitments.

First home buyer activity remained at high levels in NSW and Victoria but has fallen 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.

As interest in housing continues to rise as a result of property market growth, Mr Kelly warned about the possibility of lending restrictions in the future.

“APRA has consistently said their true north for changes to current policy settings will be household debt to income with banks, and they are showing signs of responding to this in changing some of their products on offer.”

Construction falls

For the third consecutive month, the value of loan commitments for the construction of new dwellings also dropped, ABS highlighted.

Over the month, the value of loan commitments for dwelling construction fell 2.3 per cent to $3.13 billion, with just 6,938 loan commitments commencing.

ABS attributed the fall to the reduction of the HomeBuilder grant from $25,000 to $15,000 at the beginning of the year and the cessation of the program to new applications from April 2021.

Even so, Ms Lillicrap said the number of loans for the construction of new dwellings remain elevated compared to pre-COVID levels.

In fact, the number of loans to owner-occupiers for the construction of a new dwelling in the May 2021 quarter compared to the same period last year increased strongly across states and territories – with South Australia, Western Australia, Tasmania, Queensland and the ACT seeing rises of over 100 per cent.

“Confidence in the broader housing market is strong … and low interest rates and strong house price growth will continue to support demand for housing over the coming months,” the economist concluded.

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