Investor Lending Remains Strong Amidst Drop in Home Loans

National home lending declined again over November 2022, recording the sixth consecutive fall in loan activity - a record sequence of monthly declines.

The ABS reports that the value of home loans seasonally adjusted – excluding land and alterations and additions, fell by 3.8% over November compared to October to be a remarkable 24.8% lower than recorded over November 2021.

All buyer types recorded November declines in lending, with owner-occupiers down 3.5%, investors lower by 3.6% and first home buyer falling by 5.7% over the month.

Although all buyer types reported declines over November, investor lending activity as measured annually remains well ahead of owner-occupiers and first home buyers.

The value of investor home loans over the first 11 months of  2022 was 13.9% higher compared to the same period in 2021. By comparison owner-occupier lending was lower by 11.1% with first home buyer loans down steeply by 25.6% over the same year to date measures.

Although investor lending has surged over the past year, this outcome reflects the relative underperformance of this group over previous years, with current total home loan market share remaining well below the long-term average.

Low investor loan activity of previous years was a result of questionable bank credit restrictions placed on this group with investor lending remarkably falling below first home buyer activity between August 2020 to January 2021.

The collapse in investor activity is a key contributor to the current significant national shortage of homes for rent reflecting record low vacancy rates and skyrocketing rentals.

Investor lending however increased sharply through 2021 driven by pursuit of capital growth as home prices soared and an easing in lending restrictions.  

NSW remained clearly the most popular state for residential investor loans with 4,238 reported over November followed by VIC with 3,679 and QLD 3,260. 

WA however has recorded the highest growth in investor loans over the first 11 months of 2022 compared to the same period in 2011, higher by 29.4% followed by SA up 12.6%, QLD up 6.9% and VIC higher by 3.0%. NSW investor loans however are 5.6% lower over the same year to date comparisons.

No surprise that NSW is a clear leader in the average value of investor loans over November reflecting the high-priced Sydney housing market with $801,145 followed by VIC $601,978, QLD $508,356, WA $433,416 and SA $428,571.

QLD has reported the highest growth in average investor loan values over the year to November 2022 rising by 3.0% followed by WA up 2.8%, SA up 1.7% and NSW marginally higher – up by 0.3% over the year. Investor average home loan values however fell in VIC by 1.5%. 

Housing markets generally revived over the latter part of 2022 following a sharp decline in activity through winter reflecting the first official interest rate increases in over a decade.

Revivals are set to continue over 2023 with rates likely to peak lower and earlier than expected and a surge in migration placing upward pressure on home prices and rents in already undersupplied housing markets.

Investor activity is likely to stabilise and increase driven by the resumption of price growth and continued strong rent rises proving encouraging returns in a high-inflation economy.

Dr Andrew Wilson - Chief Economist My Housing Market  

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