Property investors are starting to strengthen their presence in the housing market, with investment loans reaching their highest growth in a year in November, according to the Australian Bureau of Statistics.
The value of investor loans increased 2.2% in November, the strongest growth recorded by the segment in the past 12 months. Investor loans have increased by about 10% from the low point recorded earlier in 2019.
This growth is consistent with other indicators pointing to the early stages of the housing market's recovery from the slowdown, said Master Builders chief economist Shane Garrett.
"The renewed enthusiasm of investors for Australian housing is the result of a return to solid growth in house prices in key markets as well as more attractive financing conditions stemming from the three declines RBA interest rate last year, "he said.
Although gains in the segment also provide an early sign that investors are picking up, investor activity has remained subdued from the peak level it reached in 2015.
In contrast, first-time home buyers experienced a marginal decline during the month, with financing down 0.9%. However, overall lending to this segment has remained solid, said Geordan Murray, an economist with the Housing Industry Association (HIA).
"Stimulus packages, including interest rate cuts, tax cuts and easing of APRA loan restrictions, have a positive impact on the housing market. The Government's First Home Loan Deposit Scheme will also help eligible first-time home buyers to enter the market starting this month, "he said.
However, loans to households for construction and the purchase of new housing remain low. In fact, construction loans fell 8.4% to their lowest level since 2012.
"The weakness in construction loans in November is largely a legacy of the very low sales volumes that home builders experienced in the first half of the year," said Murray.
This drop could be linked to the drop in construction approvals. Recent ABS approval figures show that overall building approvals have dropped by 20%. In New South Wales, the number of approved private sector homes decreased 3.4%.
Despite the decrease in funding for the construction of new houses, the homeowner's loan commitments increased by 1.6% during the month, recording a sixth consecutive month of growth.
"If these conditions persist, the market will stabilize this year," said Murray.
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