This article is from the Australian Property Journal archive
SURGING rents and a greater borrowing capacity have continued to attract investors to the housing market, with lending in the market segment surging by 36.1% over the year to April, according to the Australian Bureau of Statistics.
Seasonally adjusted data showed lending to investor lending rose 5.6% month-on-month to $10.86 billion. Owner occupier lending lifted 4.3% in April, but at 18.7% in annual terms has grown at barely half the rate of investor loans.
First home buyer loans rose 3.4% to $5.4 billion, a rise of 18.6% compared to a year ago.
“Lending to investors continued to rise strongly relative to owner-occupiers, driven by increasing loan sizes. This likely reflects expectations of higher rental yields and the greater borrowing capacity of investors,” said Mish Tan, ABS head of finance statistics.
Rents in 2024 have been growing at their fastest rate in 17 years amid the severe mismatch between demand and housing supply. CoreLogic data on advertised rents suggest that rents will keep rising by 10% per annum throughout this year, putting upwards pressure on yields, which are currently at their highest in nearly five years.
The official data showed that in original terms, the average size of an investor loan for the purchase of an existing dwelling grew 9.5% year-on-year, from $592,000 to $648,000. In comparison, the average loan size for an owner occupier first home buyer grew 6.8%, from $498,000 to $532,000.
“Positive real wage growth and tax cuts should see borrowing capacity rise, which combined with continued housing price growth, is likely to see loan sizes continue growing,” said ANZ economists Blair Chapman and Madeline Dunk.
The growth in the value of investor loans was strongest in NSW and Queensland, increasing 43.9% and 46.4% annually.
The number of new home and investment property loan commitments has increased 30.7% since the same time last year, with more than 50,000 loans written in April.
Canstar’s finance expert, Steve Mickenbecker said the initial shock of 3.5% of cash rate increases in the year to April 2023 crashed the lending market, with the number of new loans down 25% from 51,042 in April 2022 to 38,413 in April 2023.
“But that is where it has ended and apparently the market has found a floor, with the number of loans now almost recovered at 50,188.
“Increased interest rates have put a whole group of borrowers under extreme pressure, especially those who borrowed in the couple of years preceding cash rate increases, and that pain continues. But new borrowers are putting it behind them.”
By number, new owner occupier first home buyer loans rose 3.0% in the month to be 10.8% higher compared to a year ago.
There was a small uplift of 1.7% in value of new loans refinanced to a new lender compared to the previous month. However, it is down 16.3% compared to the same time last year.
