Canstar reveals how tight rental markets are fueling a 34% rise in investor loans
Australia’s housing market continued its upward trend in August 2024, reaching the highest level of new lending since May 2022. According to the latest data from the Australian Bureau of Statistics (ABS), the total value of new housing loans increased by 1.0% to $30.4 billion, with investor activity leading the charge.
Canstar’s analysis of the ABS data showed that investor loans saw a significant boost, rising 1.4% in August to $11.71 billion – a 34.2% increase from the same period last year. This surge in investor lending marked the second-highest monthly value on record.
“Investors have continued to open their wallets, despite the higher cost of borrowing, in pursuit of capital growth, buoyed by a tight rental market. For many of these buyers, the equation is still stacking up ahead of owner-occupiers who are having to foot the full cost of paying the mortgage without the support of rental income,” said Sally Tindall (pictured above), Canstar data insights director.
Loans to owner-occupiers also grew, increasing by 0.7% to $18.7 billion, reflecting a 16.5% rise year-on-year. However, first-home buyers faced a slight dip, with loans for this group dropping by 1.5% from July to August.
Despite the monthly decline, first-home buyer activity was still 9.2% higher than in August 2023. Tindall pointed out that while first-home buyers remain active, they face stiff competition from investors who can use rental income to offset the burden of higher mortgage payments.
Breaking down the data by state, Queensland emerged as a key driver of the national rise. Housing loan commitments in the state soared by 40% over the past year, adding $2 billion in value, more than any other state. In contrast, the average national loan size for owner-occupiers dropped by 1% in August, falling to $636,208. Although most states saw decreases, Queensland and Tasmania bucked the trend, with Queensland posting a record high loan size of $603,988.
“It’s a relief to see the average new owner-occupier loan size cool slightly in August. While it’s too early to call it a trend, it could well be a sign some buyers are finally capping out—at least until the rate hikes come,” Tindall said.
However, refinancing activity continued to decline. Loans refinanced to external lenders fell by 3.1% in August, part of an 18.6% decrease compared to August 2023. Fixed-rate loans remained unpopular, accounting for just 2.0% of all new and refinanced loans in August, significantly lower than the 46% peak seen in July 2021.
“Fixing is likely to remain on the nose for most borrowers despite the flood of fixed-rate cuts,” Tindall said.
Overall, the data indicates that while the housing market remains robust, investors are leading the charge, capitalizing on favorable conditions in the rental market. In contrast, owner-occupiers and first-home buyers are facing more pressure amid rising interest rates and higher borrowing costs
