Investors continue to pounce on property markets

Investor lending is growing at its fastest rate in nearly 18 years, as housing finance overall hit a record high of more than $30 billion in March.

Businessman or investor looking at documents in front of a model house
Investor lending has been ramping up since hitting a cyclical low in May last year. Photo: Shutterstock (Image source:

Investor lending is growing at its fastest rate in nearly 18 years, as housing finance overall hit a record high of more than $30 billion in March.

Data from the Australian Bureau of Statistics showed investor lending accounted for more than half of the monthly rise in housing loan commitments as it rose to $7.8 billion, an increase of 54.3 per cent compared to March 2020.

Investor lending growth was strongest in New South Wales (8.2 per cent), Victoria (1.6 per cent) and Queensland (1.1 per cent), while all states and territories other than the ACT recorded increases. 

The strong growth continued a rising trend of investor finance following a 20-year trough in May last year, ABS head of finance and wealth Katherine Keenan said.

“The rise in March is the largest recorded since July 2003 and was driven by increased loan commitments to investors for existing dwellings,” Ms Keenan said. research director Sally Tindall said there were several factors luring investors into property en masse.

“Investors are storming back into the market looking to capitalise on the predicted property price rises,” she said. 

“Australians took out $10.76 billion more in home loans this March than in March 2020 – that’s a huge rise in home lending as people reach further into their wallets to outbid their competitors at auctions. 

“Record low rates are playing their part, but so are the property price forecasts. People are determined to get in now before they’re priced out completely.”

The ABS said the value of home loans for owner occupiers rose 3.3 per cent in the month, to hit a value of $22.4 billion.

Overall, housing finance hit an all-time high of $30.23 billion, a $10.76 billion increase on the same time last year.

Loans for established dwellings rose by 8.8 per cent, while the value of home loans for owner-occupiers building new homes fell by 14.5 per cent, the first fall since HomeBuilder was introduced in June last year.

And while loans for first homebuyers pulled back in March, analysis by the Housing Industry Association showed first-time buyers accounted for 41 per cent of new loans issued over the past six months.

HIA senior economist Nick Ward said first homebuyer activity was at its highest level since GFC-related stimulus.

“HomeBuilder wasn’t targeted at first home buyers however, the eligibility requirements of the grant meant that this cohort were significant beneficiaries of the program,” Mr Ward said. 

“They are also taking advantage of other stimulus measures such as the First Home Loan Deposit Scheme and state government incentives. 

 “Across the rest of the market, the number of loans for the construction or purchase of a new home was 109.9 per cent higher in the three months to March 2021 than in the previous year. 

“The data for March suggests that the surge due to HomeBuilder is starting to ease from record levels.”

While HomeBuilder will no longer be a driving factor in home lending, 75 per cent of economists and experts surveyed this month by Finder expect the record-breaking pace of borrowing to continue over the next six months.

Finder head of research Graham Cooke said the surge in housing finance over the last six months could just be the “tip of the iceberg”.

“Property demand is continuing to run rampant, with buyers spurred on by a combination of fear of missing out and low interest rates – many of which are beginning to rise,” Mr Cooke said.

“The last six months saw the highest amount borrowed to purchase housing over any six-month period in history. What economists have told us is that the next six will be record-breaking.”

“While low rates mean lower repayments, tread cautiously – if you overextend yourself and rates rise, you may find you have a tiger by the tail.”

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