Buyer activity cools as investors leave market

Lending to investors has declined for a sixth consecutive month – and further falls in both investor and owner-occupier activity may lie ahead.

The value of investor finance commitments declined to $11.5 billion in October, after falling 6.1 per cent over the month and 4.9 per cent over the year, according to new data from the Australian Bureau of Statistics.

By contrast, the owner-occupier sector grew 0.4 per cent over the month and 23.6 per cent over the year to $21.2 billion.

Combined, $32.6 billion worth of home loans were approved in October – down 2.0 per cent in monthly terms but up 11.8 per cent in annual terms.

Mortgage Choice chief executive John Flavell said the investor crackdown – which started in earnest in May – has filtered through to the market and restricted demand.

“Over the coming months, I wouldn’t be surprised to see the total value of investment lending activity continue to drop as the changes being made by Australia’s lenders continue to be felt by Australian borrowers and potential investors,” he said.

Meanwhile, the number of owner-occupied home loans reached 55,571 in October – a 0.5 per cent monthly decrease but a 7.4 per cent annual increase.

Housing Industry Association economist Diwa Hopkins said this was a strong result, but that owner-occupier activity could decline in coming months given that many banks raised their mortgage rates in November.

“The next update to housing finance will provide the very first glimpse of the impact that this change in credit conditions is having,” she said.

“While interest rates remain low, the second half of 2015 has seen credit conditions become tighter and the early indications are that residential construction – a key source of support for the broader domestic economy – will be affected.”

[Related: Agency feels full force of investor crackdown]

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