Unless you’ve been in a long-term coma or harboring in an underground bunker in fear of the Millennium Bug, you’ve probably heard the argument that Australian housing investors are evil, pushing the price of property out of the reach of young Australians just to obtain a government-funded tax deduction.
Though true that increased investor activity has contributed to recent house price gains — it is a market, after all, dictated by supply and demand — is it really true that investors are creating a housing affordability crisis?
Are they only adding to demand, pushing up prices, while doing nothing about housing supply?
While true that the vast majority of properties purchased by investors are for existing dwellings, as seen in the charts below, it’s not accurate to say they’re doing nothing to add to supply. They are.
The first chart looks at the split between owner-occupier and investor lending solely for housing construction.
According to the ABS, the value of investor lending for housing construction rose to $1.829 billion in March, the largest monthly total on record.
(To allow a fair comparison, the value of lending to investors to purchase existing property came in at $137.62 billion over the past 12 months, some 11 times greater than the value for construction.)
It was also the first time that the value of loans to investors exceeded that to owner-occupiers since December 2002.
Combined with owner-occupiers, total lending for housing construction jumped to $3.588 billion for the month, also a record high.
Though questions over the sustainability of the bounce will be questioned — it was a remarkable, record-breaking rise after all — as the next chart shows, the increase is part of a broader trend in investor lending.
The value of construction loans to investors over the past 12 months totaled $12.419 billion, the largest dollar figure on record.
Although still dwarfed by that to owner-occupiers which came in at $21.432 billion, at 36.7%, the proportion of total construction loans to investors was the highest in nearly a decade.
Clearly lots of records are being broken, signalling investors are not just buying existing properties but building them as well.