Investors are truly back in the game, with new housing loan commitments now valued at over $9 billion, new research has found.
The latest figures from the Australian Bureau of Statistics’ (ABS) Lending to Households and Businesses report showed that new housing loan commitments were up by 4.9 per cent in May 2021 — reaching a new high of $32.6 billion.
The rise was largely driven by investor housing loan commitments, which rose by 13.3 per cent to $9.1 billion — the highest level since June 2015.
“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 New South Wales 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 by 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 by 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 by 0.8 of a percentage point, it remained at historically high levels, ultimately accounting for 32.7 per cent of all owner-occupier commitments.
First home buyer activity remained at high levels in New South Wales 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,” he said.
For the third consecutive month, the value of loan commitments for the construction of new dwellings also dropped, the ABS highlighted.
Over the month, the value of loan commitments for dwelling construction fell by 2.3 per cent to $3.13 billion, with just 6,938 loan commitments commencing.
The 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 with the same period last year increased strongly across states and territories — with South Australia, Western Australia, Tasmania, Queensland and the Australian Capital Territory 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.