Investor lending hits six-month high as home buyers pull back

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Total new home loan commitments fell slightly in March according to figures released yesterday by the Australian Bureau of Statistics (ABS).

The ABS figures show $32.73b worth of home loans were written during March, a 0.2% fall when compared to figures from February.

During the March 2016 quarter, the value of lending declined by 1.2% and is 3.7% lower than the March 2015 quarter

The overall drop in lending was driven by owner occupiers pulling back, with loans to home buyers totalling $20.7b during March, a monthly fall of 1.7%.

First home buyers accounted for just 14.2% of all commitments during March, the lowest proportion since May 2004.

It was a different story for investor lending activity, with the $12b worth of investment loans written during March a 1.5% increase compared to February and the highest monthly total since September 2015.

While March saw a rise in investor lending, its monthly total is still well below the peak of $14.2b from April 2015 and Real Estate Institute of Australia (REIA) president Neville Sanders said regulatory changes are still being felt in the market.

“Despite an increase in the value of investment housing commitments in [March] this follows nine months of falling investor lending in response to the increase in mortgage rates for investors and the strengthening of banks’ non-price lending terms,” Sanders said.

“The lending figures show that the macro prudential measures introduced are working and that owner occupiers are the dominant force in the stabilising market,” he said.

While investment activity has moderated over the past year, Housing Industry Association economist Diwa Hopkins said there have been good signs for the construction industry with lending to investors for the building of new homes increasing in March.  

“While total home lending edged marginally lower in March, lending to investors in the new housing market jumped by 54.1%. This moderated the effect of declining lending that occurred in each of the other components of housing finance,” Hopkins said.

“Today’s housing finance results add to a string of positive updates for the residential construction sector that indicate 2016 will represent another healthy year of activity,” she said.

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