Are investors barking up the wrong tree?
As investors are becoming more active, the housing activity is beginning to change. Owner occupiers have been the primary drivers of the housing market bounce back, comprising of 76% of all new home loans over the past twelve months to March 2021. This compares with the decade average where owner occupiers have comprised a smaller 65% of demand. As such, within the past 6 months, the value of investor loans has grown by 48.1%, in comparision to the value of owner occupied loans being increased by a smaller 29.7%. Overall, on a yearly basis, the increased value of owner occupier lending being (+55.6%) roughly equates with the rise in investor loans, being (54.3%). This can be seen as a result of investors trying to play catch up.
The share of investor lending saw a temporary revival in 2016. However, shortly this turned again due to a second round of credit tightening in 2017, in which was focused on reducing interest only lending. Additionally, this was also a product of being in an uncertain and cautious atmosphere, during and after the Royal Commission. Ultimatley, the share of investors in the market had trended consistently low until Februrary 2021.
The investor activity still reamins below average across all states and territories, spreading from only 13.3% of mortgage demand in the Northern Territory for exmaple, to 31.5% of demand within New South Wales.
In turn, this data on loan commitments reveals that the investor demand is mainly concentrated in New South Wales, in specific the Sydney region. This ultimatley refelects the historical patterns of the shares of investors as this group of buyers is avergaing 41.4% of mortgage demand over the past ten years. Further, this notion is evident in that as of March 2021, New South Wales was the only state where investors comprised more than 30% of mortgage demand.
- Tim Lawless (CoreLogic)
