Investor demand is entering positive territory for the first time in two years as the home loan market rebound gathers momentum, data from the Australian Bureau of Statistics (ABS) has revealed.
Data from the latest ABS Lending Indicators shows a 4.4% ($19.6bn) increase in the value of approved home loans in December. The increase resulted from a 5.1% ($14.2bn) spike in the value owner-occupied home loans — the sharpest spike since August 2015.
The value of investor loans, excluding refinancing, hit $5.44bn over the month, representing gains of 2.8% monthly and 4.9% annually on seasonally adjusted terms.
"The value of new loan commitments for investor housing, while tracking upward over the past six months, remained down on the March 2017 peak," said Bruce Hockman, chief economist at the ABS.
The data also reveals a 17.9% growth in the owner-occupier segment and that the value of mortgage volumes rose by 14% in the 2019 calendar year. New loan commitments also rose 3.5% for personal fixed term loans (seasonally adjusted) while business construction fell 0.2%.
Reflecting on the data, ANZ Research observed that “improved sentiment in the property market, driven by easier credit, low interest rates and consistently strong price growth, is behind the continuing strength of mortgage demand.”
While Tim Hibbert, principal economist at BIS Oxford Economics, said he expects the strong demand for housing credit to continue throughout the year as dwelling values rebound.
Hibbert said, “Price growth in Sydney and Melbourne continues to run strong, with Australia’s other major cities starting to join the party. With property turnover on the up, the outlook for total housing loan demand looks strong for 2020.”
ANZ Research also noted that “while housing credit growth is still low, strong demand for finance looks to be of concern for the RBA, with the bank now weighing up more carefully the costs benefits of further rate cuts.”
Indeed, in his speech at the National Press Club in early February, RBA governor Philip Lowe said they would closely monitor development in the credit space to ensure that low interest rates do not trigger disorderly spike in the mortgage market.
“[We] need to remember that it is possible to have too much of a good thing,” said Lowe.