New home loans dropped by a record 15% as Australia’s housing market downturn deepens
Reduced competition from investors has also created more opportunities for first-home buyers. Here’s what the data revealed.
Mortgage loans in Australia plummeted by a record 15% in the September quarter, as the nation's housing market continued its downward spiral, according to recent official figures. The Reserve Bank's five consecutive interest rate hikes and stagnant wages have dampened lending across investors, first-time buyers, and existing homeowners.
Investor lending, which fell by an alarming 38.5%, was the primary driver behind the drop. Tax reforms aimed at investors have also contributed to the decline in investor demand for existing homes.
While investor lending has plummeted, first-time buyers' demand has softened by a more moderate 8.6%. The current drop in mortgage lending underscores the housing market's volatility, with prices soaring since 2000 despite previous downturns in both property values and loan issuance. Higher interest rates affect all homebuyers, but the impact has been steepest for investors, who constitute the largest segment of housing demand and are more sensitive to changes in house prices and interest rates.
Investors saw both a sharp drop in the number and value of new mortgages over the past year, driven by a 46.2% decline in the purchase of existing properties. However, not all buyers are deterred by the situation. New loans to non-first home buyers dropped by 8.7%, and first-home buyers by 12.3%. Despite the price drop and increased mortgage costs, some buyers may find more opportunities for home ownership due to falling prices and reduced competition from investors.
The shift towards owner-occupier lending is noteworthy, although investors still make up 1.5 times the volume of loans compared to first-home buyers. This shift echoes the pattern seen in 2014 and 2016 when tighter credit rules for investors were introduced to curb their growth. The tighter rules led to a reduction in investor lending share and a decline in investor-acquired home prices relative to other segments.
The tightening rules have been replaced by a serviceability buffer for all borrowers, meaning borrowers must be able to withstand a further 3% rate increase above the current level – or 12 standard rate rises. However, borrowers are increasingly turning to non-bank lenders, with their lending jumping by 67.7% over the year, albeit from a low base.
Written by urgent.news from The Conversation AU's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
