Home loan numbers high but investors’ loans drop

Home loan numbers high but investors’ loans drop

Posted on Friday, October 09 2015 at 2:16 PM

Australians’ appetite for property shows no signs of slowing, with the value of new home loans surging in August 2015 to a fresh high of $34.6 billion, according to a report released today.

Owner-occupiers make up the huge gains over the month, according to the head of new banking business act. Amanda Watt, who welcomed a rise in the proportion of first homebuyers in the market.

Over the month, the value of new home loans taken for owner-occupier housing surged 6.1 per cent to a record $20.8 billion, while the value of investment housing loans showed a drop of 0.4 per cent to $13.6 billion, taking the total value of home loans written in the month to a fresh record of $34.6 billion  –  up 3.5 per cent according to Australian Bureau Statistics (ABS) housing finance data. 

In original terms, the number of first homebuyer commitments as a percentage of total owner-occupied housing finance commitments rose to 15.7 per cent in August from 15.4 per cent in July, boosted by two official interest rates cuts earlier in the year.

Fixed-rate loans, as a proportion of all new home loans, fell to 9.6 per cent, their lowest level in around four years, as investors took advantage of record low variable interest rates. 

act.’s Amanda Watt says the push into property could reflect some Australians’ love affair with the security of bricks and mortar and the gains it offers, at a time when many investors fear putting their money into stocks.

“Not only is property seen as a good hedge against inflation, it’s seen as an all-round wealth builder over the long term. 

“There’s more perceived certainty that returns from property will be positive and with a huge level of volatility in share markets in recent months and talk of a correction, Australians are probably holding back from share investments and instead putting their savings into property, from which they can enjoy solid capital gains over the long term and even spectacular gains over the shorter term, as we’ve seen in Sydney. 

“Investors, too, can enjoy a regular income stream from rent,” Watt adds.

“With all the current uncertainty in markets in Australia and around the globe, this is expected to maintain a high level of interest in the property market and will continue to support growth in real estate values, and propel even higher the number of home loans being taken by Australians in coming months, with interest rates at historically low levels, which has helped to make the servicing of home loans more affordable,” Watt says.

CommSec economist Savanth Sebastian says the latest housing finance statistics make for interesting reading. 

“Not only is the size of the average home loan holding at a record high, but it’s growing at the fastest pace in 12 years,” he says.

“Over the past year the average home loan grew by 15.4 per cent and is showing no signs of slowing down.”

Sebastian suggests policymakers will be encouraged by the lift in owner-occupied loans at the expense of investor finance. 

“The value of investment loans has now fallen for three out of the past four months. Overall the housing finance statistics don’t suggest a huge pullback in home lending, although there are signs activity levels are starting to ease. 

“Over the next few months the tighter bank lending standards will filter through to the housing statistics.”

He adds: “There’s no doubt the pullback in investor loans is a positive, and will help to cool property prices, but housing is all about demand and supply. Encouragingly, loans to build new homes lifted after falling for the prior three months. If there is a substantial pullback in new construction it could be more of a detriment in the longer-term.”

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