Investor borrowing hits highest level since 2015 while first home buyers drop out

Despite sky-high prices, enthusiasm for investment properties appears to be continuing to grow, with investors taking out new loans at near-record levels in order to get into the market.

Released yesterday, the latest lending indicators from the Australian Bureau of Statistics (ABS) show that new home loan commitments taken on by investors rose by 1.1% to $9.73 billion in the month of October.

The latest figure is the largest recorded by the ABS in over six years, and it’s more than double the recent low point of $4.23 billion recorded by the Bureau towards the start of the pandemic in May 2020.

“The value of new loan commitments for investor housing has grown for 12 consecutive months, reaching $9.7b in October 2021. This was the highest level since the all-time high in April 2015,” said ABS head of finance and wealth, Katherine Keenan.

"While the value of investor loan commitments has grown 90 per cent over the past year, the number of investor loans only accounted for 33 per cent of all new loan commitments for housing in October."

New loan commitments (seasonally adjusted). Source: ABS lending indicators, October 2021

As the above graph from the ABS shows, the amount of new loan commitments made by investors is heading in the opposite direction to owner occupiers though.

Since reaching an all-time high of $23.44 billion back in May, new lending to owner occupiers has fallen by around 15%, with the latest figure now below the $20 billion mark.

“The value of owner-occupier loan commitments fell for the fifth consecutive month, but remained 15 per cent higher compared to a year ago and 43 per cent higher than pre-COVID levels in February 2020,” said Keenan.

Part of that drop in new owner-occupier lending is represented by first home buyers who, as a group, have fallen off significantly during the year. According to the ABS, the number of new loan commitments made by first home buyers has now fallen for nine consecutive months since peaking in January.

“Falls in the number of first home buyer loan commitments were seen across most states and territories, particularly Western Australia, which fell 13.8 per cent, Queensland, which fell 6.3 per cent and New South Wales, which fell 4.3 per cent. There were small increases in Victoria of 1.9 per cent and in the Northern Territory of 6.0 per cent,” Keenan said.

New loan commitments to first home buyers (seasonally adjusted). Source: ABS lending indicators, October 2021

This sustained drop off in first-time buyers is likely, in part, a by-product of the surging price increases we’ve witnessed in property prices over the same period.

The latest figures from CoreLogic released yesterday show that, despite a relatively moderate monthly increase of 1.3%, national housing values are up 22.2% over the year - equivalent to an $126,700 increase in the median value of an Australian home.

And with two of the country's major banks predicting further price rises in 2022, it’s possible that we’ll continue to see fewer first home buyers taking out loans in the months ahead. 

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