New figures show the three months to October were “the worst for housing loans to investors” in more than five years.
The Australian Bureau of Statistics (ABS) released the October housing finance figures yesterday (10 December).
The total value of dwelling commitments fell 1% in October 2018 compared with September 2018, while the seasonally adjusted series rose 2.6%.
The total value of owner-occupied housing commitments also dropped by 1% to $210million in October 2018, in trend terms.
Falls were recorded in commitments for the purchase of established dwellings, commitments for the purchase of new dwellings and commitments for the construction of dwellings.
The total value of investment housing commitments also dropped by 1% compared to the month before.
Falls were recorded in commitments for the purchase of dwellings by individuals for rent or resale, commitments for the construction of dwellings for rent or resale and commitments for the purchase of dwellings by others for rent or resale.
MBA chief economist Shane Garrett said over the three months to October the value of investor loans had dropped by 4.3% and compared to October 2017 was down by 18.5%.
He said, “August 2013 was the last time investor lending volumes were as low as they are now. Lending to housing investors has fallen by over 30% since the peak in early 2015.
“The introduction of more stringent APRA regulations in early 2015 kicked off the decline in investor lending. It has been greatly exacerbated by the commencement of the Royal Commission’s work. Lenders have become much more nervous about making financing available.
“The reduction in investor activity is not all down to lending policies. Many investors are reluctant about entering into markets where house prices are falling. In other places, rental price growth is soft and investors have sat out.”
However, while investors look to be exiting the market, Garrett points out the story for first home buyers is more positive.
He said, “At 18.1%, the FHB share of owner occupier housing loans is at its highest since late 2012. About 114,000 FHB home loans have been issued over the past 12 months, an increase of 14.9% on a year earlier.
“Despite the significant challenges the housing market faces, it is encouraging that so many Australians can look forward to celebrating Christmas in their very own home for the first time this year.”