Despite the Labor party’s vow to end negative gearing once they win in the upcoming federal elections, Aussie investors continue to show enthusiasm for the property market as the first home buyers’ share of new loans falls to its lowest level in 12 years.

Australians also continue to bet on higher prices despite the possibility of a housing crash once negative gearing is put to an end. According to the Australia Bureau of Statistics, the value of loans granted to investors last March rose 1.5. per cent to $12 billion, in spite of the fact that they are more vulnerable to price changes than owner-occupiers. This has raised fears that investment demand for property was set to increase further.

“The RBA is likely to keep a close watch on housing market indicators to ensure the recent cash rate cut does not reignite risks,” said National Australia Bank’s Tapas Strickland.

However, investors’ share of new loans has fallen from 43 per cent to 37 per cent. Average loan sizes for both first home buyers and owner occupiers both increased.

“Because investor lending has been restrained for around six months, it’s possible banks will now be able to show stronger growth in this area and still remain below the speed limit,” Strickland said.

John Peters of the Commonwealth Bank also added, “Further falling mortgage rates may arrest to a degree the clear downtrend in investors lending. With more RBA policy easing expected, further progress on dampening investor lending may be more problematic.”

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