Investor activity driving up housing lending growth

According to the latest Lending Indicators data released by the Australian Bureau of Statistics (ABS), the value of new investor loan commitments for housing rose 2 per cent to $9 billion in September 2023, up 2.6 per cent on the same period last year.

ABS head of finance statistics Mish Tan said total growth in investor loans has exceeded owner-occupier loans as the value of new housing loan commitments has trended upwards since February 2023.

“That said, the total value of new housing loan commitments in recent months remains below the all‑time highs seen throughout the COVID-19 pandemic,” Ms Tan said.

The ABS found that the value of new investor loan commitments rose across most states and territories over September, primarily driven by the increases in Victoria and NSW at $127 million and $77 million, respectively.

Commonwealth Bank of Australia (CBA) economist Stephen Wu said investor lending activity has driven up the value of new housing loan commitments since the beginning of the year.

“The upturn in investor lending has coincided with the rebound in property prices since February,” Mr Wu said.

“Dwelling prices have increased by 8.9 per cent since their February trough. Trend investor lending has increased by 13 per cent over the same period.

“That said, investor lending remains well-down from its pandemic peaks (-2.2 per cent), but home prices are back to their previous peak. This implies the usual relationship between new lending and home prices has broken down.”

Indeed, national home prices increased to “new records” in October, with PropTrack’s Home Price Index rising by 0.36 per cent month on month, putting prices up 4.39 per cent over the year.

Similarly, CoreLogic’s Home Value Index (HVI) rose by 0.9 per cent in October, with the national HVI increasing 7.6 per cent since bottoming out in January as the index now sits half a per cent below the historic highs recorded in April 2022.

Mr Wu added that the number of new loan commitments to purchase an existing dwelling has picked up along with an increase in investors purchasing residential land.

Overall, the value for total housing rose 0.6 per cent to $25 billion following a 2.4 per cent increase in August, sitting 4.7 per cent lower than September 2022.

The value of new loan commitments for owner-occupier housing fell 0.1 per cent to $16.1 billion and was 8.4 per cent lower compared to a year ago.

The value of external refinancing has dropped for the second month in a row following the boom seen throughout 2023, with declines of 7.8 per cent for total housing, 8.4 per cent for owner-occupier housing and 6.4 per cent for investor housing.

Westpac senior economist Matthew Hassan said: “Notably, refinance activity has fallen sharply to be down 14 per cent over the last two months.

“The extraordinary boom that has seen over $310 billion of loans refinanced since May, around 15 per cent of all loans outstanding, is finally subsiding.”

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