The value of new home loans to investors has charted a sharp increase, rising 11.6% over the three months ending August 2019 – the fastest rate of growth in investment loan commitments since November 2016.
The rise follows a period of inactivity, with investor participation falling from 43% of market activity in mid-2015 to a recent record low of 25.8% in July 2019.
“The slump was attributable to a range of factors, including macro-prudential policies which limited the speed of investment credit growth and capped interest only lending,” said CoreLogic head of research, Tim Lawless.
On top of the slowdown in the housing market that impacted all buyers, investors have also been paying interest rates far above owner occupier rates.
However, credit policies have loosened slightly and rates are becoming slightly more competitive for investment borrowers.
“Housing market conditions have turned a corner, with values rising across five of the eight capital cities over the September quarter and three of the broad ‘rest of state’ region,” said Lawless.
The value of investment loans has increased in every state and territory, with the largest rise over the three months ending August in Victoria and Queensland, with new commitments up 19.1%.
Proportionally, investment activity is most concentrated in NSW where investors comprise 31.2% of mortgage demand based on the value of loan commitments. Western Australia shows the lowest share of investors at 15.4%.
“Looking forward there is a strong likelihood that investor activity will increase further,” said Lawless.
“The long-term average shows investors are typically around one-third of mortgage demand, implying investors are currently underrepresented in the market.
“As investment activity rises we could see increased price pressures as this sector of the market tends to be more competitive in setting new price benchmarks.”