Australians aren't investing in property like they used to — and this chart provides the proof

  • The value of new home loans to property investors has nearly halved in recent years.
  • There’s a variety of factors that has contributed to the decline, both from the supply and demand side of the equation.
  • The decline in New South Wales and Victoria — states previously dominated by investors awhere home prices have fallen the most over the past 12 months — has been particularly acute.

Australians aren’t investing in property like they used to.

This chart below underlines that point:

NAB

Produced by the National Australia Bank, the chart breaks down the value of new investor housing loans by state, looking at the trends going back to the early 2000s.

According to data released by the ABS on Monday, the value of new loans to investors across the country fell to $4.54 billion in March. It was the lowest monthly total since March 2011 with new lending near-halving from the record levels seen just a couple of years ago.

In late 2014, APRA, Australia’s prudential regulator, announced that it would cap annual housing investor credit growth to a maximum 10%. That saw the value of new investor lending slow sharply before rate cuts from the RBA in 2016 helped to reignite investor demand.

The regulator followed that move up in early 2017, limiting the proportion of interest-only loans — often favoured by investors — to 30% of all new loans.

While both restrictions have since been removed by APRA, greater scrutiny of expenses and existing debt levels by lenders, along with changes to the tax treatment of housing from the start of next year should the Labor Party win Australia’s federal election this weekend, has acted to curb both the supply and demand for investor finance, resulting in the unwind seen in the chart above.

The decline in New South Wales and Victoria — those states previously dominated by investors and where home prices have fallen the most over the past 12 months — has been particularly acute.

However, whereas investors have moved to the sidelines, improved affordability, stamp duty concessions in New South Wales and Victoria, low mortgage rates and less competition for available properties has seen first-home buyer activity pick up in recent years, as seen in this separate chart from NAB.

NAB

As a share of all new housing finance, that issued to first home owner-occupier buyers now sits at the highest level since early 2012 in trend terms.

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