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Investors Winning Battle for Housing Credit

Latest data shows first home buyers are losing out in the race for housing credit as loans to investors accounted for 51.6% of total loans in April 2015. Valued at a record AUD13.49 billion, investor loans have grown to their majority position, from 43.0% in April 2005. This is a much discussed topic in the national economy right now, but meanwhile, first home-buyers continue to struggle for access to credit, accounting for less than 10% of total loans in April.

Always a relatively small proportion of the total market (you can only be a first homeowner once, after all), from 12.9% of loan values in April 2005, first home buyers accounted for just 9.8% in April 2015, with loans valued at AUD2.56 billion. It is relevant to note that the proportion speaks as much to the growth in loans to investors, as it does to the situation facing first home buyers.

As the chart below displays, since May 2011, the value of loans to first home buyers has scudded along the bottom, never rising above AUD2.93 billion (December 2011) and never below AUD1.96 billion (January 2013). However, even at its bottom in January 2013, lending to first home buyers accounted for 10.8% of the value of total loans. With that ratio down at 9.8% in April 2015, established buyers are winning the race for housing capital.

5 - Housing Loan Approvals

For further details, go to the FWPA Data Dashboard.

For approximately a year, investor finance has bested the finance supplied to owner-occupiers (including first home buyers). One theory that may explain this, as we describe earlier in this edition of Statistics Count, is that those with ‘free capital’ are flowing their funds into housing as investors, because cash returns are poor due to record low interest rates and there is less appetite for funding the capitalisation of listed companies. Property investment is generally viewed as a relatively safe haven, the comments of the RBA and others about a housing bubble aside.

It might perhaps have been expected that first home buyers would be able to get into the housing market more easily with lower interest rates, but on a value of loans basis at least, that isn’t proving the case, especially as investors may be contributing to the increase in the price of properties. Many properties are far higher priced than expected and garnering the deposit and affording the repayments is still beyond many first home-buyers.

Lower interest rates are fuelling investment in housing, but not by those for whom it was expected to be a boon and not, as the next item details, in the free-standing houses that the forestry and wood products sectors rely upon.

Posted Date: June 23, 2015

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