Property investors regain their appetite for real estate as first home buyers also return

By business reporter Stephen Letts

Published on ABC News Updated 12 Oct 2017, 1:23pm

Investor interest in property has rebounded with an unexpected surge in activity in August.

In seasonally adjusted terms, the value of investor loans jumped 4.2 per cent over the month to $12.6 billion despite higher interest rates and tighter bank restrictions in the sector.

Total home loans were up 2.1 per cent, which was ahead of market expectations for a flat result.

New owner-occupier loans were up 0.9 per cent.

First home buyers have continued their return to the property market, taking advantage of stamp duty exemptions announced in recent state budgets.

First home buyers staked out a 17.2 per cent share of the owner-occupier market, the highest level in more than four years and well up from near-historic lows of 13.4 per cent at the start of the year.

The average loan size for first home buyers dropped marginally by $400 to $321,000, while the overall loan size for owner-occupiers was down $900 to $369,600.

The total number of loans edged up 1 per cent, driven by new and established property purchases, while the number of loans for construction fell 2.4 per cent over the month.

Investor lending still outpacing income growth

J.P. Morgan economist Henry St John said while the rebound in investor lending cuts against the grain of the recent trend, it should be put in context of the broader investor lending cycle.

“In annual terms, investor lending has moderated down to 6.5 per cent over the year, from 26.3 per cent at the start of this year,” Mr St John noted.

“At its peak during the 2013 housing market upswing, investor lending grew as rapidly as 47.3 per cent over the year, and represented closer to 45 per cent of total new lending, compared with 37.3 per cent now.”

Much of August’s gain in investor loan merely retraces the slump in July, while there has been no net growth at all over the last three months.

However, Mr St John said the trend in investor lending growth will continue to be closely monitored by the regulators.

“APRA data for the second quarter showed banks making progress in reducing interest-only loans, though measures to date do not appear sufficient to slow credit growth in line with income growth, per the regulators’ desire,” he wrote.