by Cameron Kusher

Source: CoreLogic

20 March 2017

Interest rate cuts and the return of lending to investors over the past year have seen a re-emergence of investors as a dominant force in the national housing market.

At the end of last week the Australian Bureau of Statistics (ABS) published housing finance data for January 2017 and it showed that at that time, demand from the investment segment of the market was continuing to surge.  Pairing the housing finance data with the Reserve Bank’s (RBA) lending aggregate data provides deeper insight into housing investor behaviour.

The January 2017 housing finance data showed that over the month, investors committed to a total of $13.8 billion in finance for investment properties.  The figure represented a 4.2% rise over the month and a 27.5% increase year-on-year (the largest annual increase since August 2014).  The first chart shows that the value of investor housing finance commitments remains below its previous peak but has ramped-up significantly over the past 12 months.  In fact, the value of investor housing finance commitments in January 2017 was just -5.3% lower than its historic peak in April 2015.

Monthly value of investor housing finance commitments

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The second chart highlights how most of the investor housing finance commitments are flowing to established homes rather than new homes.  This isn’t really a surprise when you consider that the amount of established housing stock is substantially greater than new stock and new housing typically has a price premium over existing stock.  Over the month, $1.2 billion in commitments were for new construction compared to $12.6 billion for established housing stock.

Monthly value of investor housing finance
commitments by property type

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The third chart comes from data published by the RBA on investor housing credit which represents the total amount outstanding to mortgage lenders for the purposes of investor housing.  In January 2017, investor credit expanded by 0.6% to be 6.6% higher over the year.  The monthly change was actually the lowest it has been in four months while the annual change was the highest it has been in 10 months.  Much like the housing finance data, the credit data shows the impact of APRAs recent curbs to investor credit growth which have slowed growth however, more recently credit has once again started to expand.

 

Monthly and annual change in investor
housing credit to Australian lenders

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The final chart shows the monthly value of investor credit outstanding to Australian lenders.  At the end of January 2017, the RBA reports that there was $572.2 billion in investor credit outstanding to Australian lenders.  This figure accounted for 34.9% of all housing credit outstanding ($1.637 trillion) and 21.5% of total outstanding credit.  The chart shows a significant rise in investor housing credit, in fact, two decades ago investor credit represented 21.8% of total housing credit and 8.7% of all credit.

Monthly value of investor housing credit
to Australian lenders

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