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Housing loans lift as investors step back in

Housing loans lift as investors step back in

Home loans valued $32.56 billion were booked in May, lifting 4.9% on the prior month, as investors flexed financial muscle and lifted the value of their loans by 13.3%. That left first home-buyers to grow their loan value by a reasonably benign 2.5%, amidst prospects they could again be frozen from the market by resurgent investor activity.

In total, the annual value of housing loans was up 95.4% on the prior year, under-scoring the extent of the growth in the housing market over almost exactly one year.

Growth rates for approvals of loans are shown in the chart below. This eighteen-years of data shows two things in particular: the rate of month-on-month growth in the value of home loans has never been steeper, and never more sustained. Unsurprising given the data on approvals and the extent of the building pipeline, but none-the-less significant.


Demonstrably, the value of all loan categories rose in May, feeding into the massive and sustained total growth in home lending shown below.


The rise of investors’ presence in the market does not necessarily herald of troubled times ahead – though often it has been. Typically, growth in the value of investor loans, especially for construction, has been linked to growth in multi-residential dwellings. So, as the sharp lift in investor loan value (reaching $756 million in May) was recorded, it was no surprise to see the beginnings of growth in approvals of multi-residential dwellings.


But the investors come back almost always squeezes the position of first home buyers, and so it has been recently – at least for the total value of loans. In May, firsties saw their share of total loan value slide for the fourth successive month to 22.3% from a peak of 26.3% in January.

For all that we might blame the investors for cutting the lunch of first home buyers, that is more a popular trope than a reality. Their loan activity is not ‘either/or’, rather it is cyclical. With a record level of new free-standing house approvals over the last year, the bias was towards first-timers and away from investors. As the stimulus ended and pent up demand was satiated, investor loans have increased as developers get their latest towers into the market.

We can, perhaps, see this in the chart below.


Just as relevant, the value of loans has been growing quite quickly. This is unsurprising given the increase in prices of established houses. As a result, the average value of 62,178 loans (for new and established dwellings) lifted to $516,224 in May, with the 15,653 loans to first home buyers also lifting to $457,043 per loan.

Even if a household is not buying or building a new dwelling, many are engaged in renovations. We can see below that the growth in loans for alterations and additions continued in May, with many households taking advantage of continued low interest rates and the free cash flow that comes from having no travel expenses. In May, total loans for renos lifted 14.1% to $575.7 million.


In a hyper-stimulated economy, home lending has almost become a national sport. Shame its not on the Olympic program, because if it was, you could pretty much guarantee it would be gold, gold, gold for Australia.

Posted Date: July 29, 2021

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