Investor activity ramps up as first homebuyers retreat

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Property investors took advantage of the dwindling number of first homebuyers in the market by lifting their stakes.

During December, investor loans rose by 1.1% (up $68 million) compared to the previous month alone. This follows an increase of 1.2% in November according to the Australian Bureau of Statistics. Commitments to buy properties to rent or resale rose 0.9% while construction of dwelling to rent or resale climbed by 2.6%. The value of investment housing commitments seasonally adjusted rose by 1.9% in December.

"The pickup in investment loans is encouraging," said Craig James, chief economist with CommSec. "Overall investment loans have posted modest gains for the past three months and are now up 17% on a year ago. The boost in the stock of investment property should gain traction in coming months as credit conditions continue to improve and investors look at property as a more attractive investment vehicle - particularly given the sharp improvement in job security."

In contrast, the proportion of first homebuyers has steadily declined to its lowest levels in 13 months. First home buyers accounted for 21% of all lending in December, easing further from record highs of 28.5% in May 2009.

Looking forward, the near term data is likely to look weak, largely due to potential home buyers having brought forward planned purchases over the past year according to CommSec.

"The interest rate hikes are taking out some of the heat from the property market," said James. "Overall the housing sector is likely to cool over the next few months. It is understandable that a period of consolidation is to be expected after what has been a phenomenal run over the last year. Importantly the sharp surge in construction loans over the past six months will continue have multiplier effects through the economy. "

The average home loan across Australia jumped 9.8% to $283,000 compared to a year ago, reflecting the staggering growth recorded over the past 12 months.

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