Investors dominate new home loans as prices rise

Investment mortgage loan growth outpaced lending to both owner occupiers and first-home buyers for a third month in July, as well-heeled investors take advantage of record-low interest rates and their extra wealth as rising prices put housing out of the reach of younger buyers.

A 1.8 per cent increase in new loan commitments to investors before refinancing pulled the monthly total up to $9.4 billion and offset a 0.4 per cent slip in owner-occupier loans as well as the 7.6 per cent drop in first-time buyer new mortgages, the Australian Bureau of Statistics said.

The loss of incentives for first home buyers such as the government’s HomeBuilder payments and the 18.4 per cent jump in median home prices in the year to August – the fastest rate of growth in 32 years – has cleared the way for investors, with the monthly new loan commitments now double their value of a year ago.

“The tailwind behind investor demand is strong, with further gains for investor lending expected over FY2022,” BIS Oxford Economics economist Maree Kilroy said.

The housing development industry will welcome the gains, especially any sign that investment capital is going into the off-the-plan market, which will help them get new projects out of the ground.

Pandemic lockdowns in both Sydney and Melbourne put at risk the recently emerging signs of recovering investor interest in new apartments and could further shrink the pipeline of new dwellings, commercial real estate agency JLL warned earlier this week.

The latest figures offer little reassurance on that score, however. Investor spending on established housing dwarfs their investment in new dwellings by nine times and spending on established homes is growing faster, Thursday’s figures show.

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