To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
The value of investment loans written in July grew 6.8 per cent while owner-occupied home loan growth saw no change, according to the latest housing finance figures released this week from the Australian Bureau of Statistics.
Investors accounted for 49.7 per cent of total loans written in July, fuelling fears that the Australian property market is overheating.
Reserve Bank governor Glenn Stevens recently voiced his concern for speculative property buying, particularly in Sydney and Melbourne.
Record-low interest rates have boosted loan demand in recent months with fixed-rate mortgages gaining momentum among borrowers.
In July, fixed-rate loans accounted for 40 per cent of all investor housing finance.
However, in a September 3 speech, the RBA governor warned borrowers not to expect low rates to produce affordable housing.
“Monetary policy can create conditions of easier funding and help the ability of the financial sector to extend credit,” he told the Committee for Economic Development of Australia.
“But it can't, for example, add to the supply of land zoned for housing, or improve the responsiveness of the construction sector to demand for additional housing stock.
“Other policies have to do that – and it's important that they do if we are to see easy credit result in more dwellings as opposed to just higher prices for the existing dwellings.”
Mr Stevens said funding conditions aren’t an impediment to creating the additional infrastructure that most people agree is needed.
The real issues are governance, risk sharing and pricing, which demand other policy responses, he said.
Mr Stevens also said that although lower interest rates would inevitably lead to more risk taking, the Reserve Bank had to make sure not to stimulate an excessive build-up of risk.
“That could leave the economy exposed to nasty shocks in the future. The more prudent approach is to try to avoid, so far as we can, that particular boom-bust cycle,” he said.
“It is stating the obvious that, at present, while we may desire to see a faster reduction in the rate of unemployment, further inflating an already elevated level of housing prices seems an unwise route to try to achieve that.”
While investors cash in on cheaper loans, first home buyers are being priced out of the booming property market.
The number of first home buyer commitments as a percentage of total owner-occupied loans fell to 12.2 per cent in July from 13.2 per cent in June.
Brokers have also signalled a significant decline in first home buyer activity.
The latest AFG Mortgage Index released this month shows first home buyers accounted for 9.5 per cent of all broker-originated mortgages in August, the lowest figure in four years.