- The ABS noted an increase in new investor loan commitments to near-record levels in October 2021.
- The owner-occupier loan commitments took a breather in October, potentially due to easing demand pressures.
- The new APRA rules are expected to favour owner-occupiers over investors.
The Australian Bureau of Statistics (ABS) latest data on lending indicators for October 2021 is full of surprises. The data demonstrates that new investor loan commitments increased 1.1 per cent to near-record levels in October this year.
Interestingly, the value of new loan commitments for investor housing reached A$9.7 billion in October, recording a rise for 12 consecutive months. This represents the highest level recorded since the all-time high in April 2015.
In terms of an annual uptick, the value of investor loan commitments grew by 90 per cent in October over the past year. Surprisingly, the number of investor loans accounted for just 33 per cent of all new loan commitments for property in October.
Investor lending across different states
The ABS noted increased investor loan commitments across most of the states and territories in October. An ongoing strength was visible in Queensland, where investor loan commitments surged by 8.9 per cent to a record high of A$2.1 billion.
Meanwhile, increases in investor loan commitments were observed in Northern Territory (up 78.7 per cent), South Australia (up 15.0 per cent), Western Australia (up 4.4 per cent), Tasmania (up 3.3 per cent) and New South Wales (up 1.3 per cent). The Australian Capital Territory and Victoria recorded falls of 12.4 per cent and 3.8 per cent, respectively, in October 2021.
In seasonally adjusted terms, the value of new loan commitments for total housing declined by 2.5 per cent in October, backed by a 4.1 per cent drop in the value of new owner-occupier loan commitments. Meanwhile, the fall in owner-occupier loan commitments was stimulated by an 8.4 per cent drop in New South Wales.
Owner-occupier loan commitments taking a breather
It is worth highlighting that the value of owner-occupier loan commitments plummeted for the fifth consecutive month in October. With the housing boom easing gradually, it seems the demand for property from owner-occupiers is taking a breather.
The property market slowdown was also evident in the latest house price growth data released by CoreLogic, which demonstrated a deceleration in the pace of rising prices. The data showed that the property prices surged by 1.3 per cent in November, which was the slowest since January.
Looking ahead, home loan rates are expected to rule in favour of owner-occupier borrowers over property investors under the new rules from the banking regulator. The Australian Prudential Regulation Authority (APRA) has recently released its new bank capital framework, which will favour lower-risk loans, like owner-occupier principal and interest mortgages.
Under the new rules, property loans to investors will be assigned higher risk weights and considered riskier. However, loans to owner-occupiers will require lower capital and are considered less risky. This could prompt an increase in loans to owner-occupiers over the months ahead.