• 16 Jan 2024
Investors, first home buyers piling back into the market

Investors and first home buyers are making a big return to the property market, with three state capitals seeing particularly strong real estate demand and higher loan values.

As the inflation beast is gradually brought to heel, borrowers are becoming increasingly confident that interest rates have reached their zenith and are again borrowing with relative gusto.

It’s first home buyers who are leading the charge, with investors not too far behind.

The latest Australian Bureau of Statistics (ABS) data shows that in November new home and investment property loans were up 13.1 per cent over the year.

The value of new loan commitments for investors was rising higher than owner-occupier borrowers. Investment lending increased by 18 per cent to reach $9.72 billion while owner-occupier new loan commitments were up only 10.6 per cent over the year to reach $17.86 billion in loans.

But it was first home buyer activity that stood out, with a 25.8 per cent increase in the value of new loan commitments for first-time buyers that saw the value of new loans reach $5.25 billion.

First home buyers as a portion of owner occupier housing finance graph

(Source: CoreLogic)

Canstar’s lending expert, Steve Mickenbecker, said the figures suggested Australian had confidence in the property market excelling in 2024.

“You could say investors are back, with new lending up by 18 percent year-on-year, suggesting they hold a healthy expectation for property prices over the coming few years.

“Looking at the number of buyers, first home buyers’ participation represents 37 percent of all new loans.

“First home buyers have in recent years had to weather the impact of rate rises on borrowing power.

“Canstar’s analysis shows for the average income, a solo borrower has seen their borrowing capacity fall since April 2022 by $137,000 and likewise, a double-income couple’s budget has been depleted by $331,000.”

Real Estate Institute of Australia (REIA) President, Leanne Pilkington, expressed relief that there was a return of investors.

“The results follow the latest ABS data showing the consumer price index rose 4.3 per cent in the 12 months to November 2023, down from 4.9 per cent per cent in October.

“The 13 interest rate rises have finally curtailed inflation, with all signs showing the economy is now heading in the right direction.”

Ms Pilkington said owner-occupier loans recorded moderate growth in November with some states such as Tasmania and NSW showing signs of stabilising.

Investors as a portion of total lending by state (based on value, excluding refinancing)

Investors as a portion of total lending (based on value, excluding refinancing) graph

(Source: CoreLogic)

ABS data shows new loan commitments in Queensland rose 3.3 per cent, Victoria rose 2.0 per cent, South Australia rose 6.9 per cent, in the Australian Capital Territory rose 9.4 per cent and in the Northern Territory rose 6.0 per cent while New South Wales fell 1.1 per cent, in Western Australia fell 2.9 per cent and Tasmania fell 15.2 per cent.

While new loans may have slipped in Western Australia, the value of the average loan size reached record levels there, as well as in Queensland and South Australia, reflecting the strong capital growth in those property markets over the past year.

Queensland reached $557,510, South Australia $510,057 and Western Australia $497,275 in average loan size.

Helen Avis, Director of Finance, Specialist Mortgage, said Perth was seeing a lot of interest from eastern states buyers.

“With stock levels so low – there are now just over 3,000 properties for sale in Perth and many are being sold as soon as they are listed – it’s little surprise that borrowers are taking bigger loans to achieve their property goals.”

“While not quite on the same scale, a similar picture was playing out in Adelaide and Brisbane and south-east Queensland.”

Maree Kilroy, Senior Economist for Oxford Economics Australia, agreed that Perth could expect further strong growth in 2024.

Following the rebound over 2023, we expect 2024 will be a softer year with home prices increasing a more muted 2.7 per cent nationally.

“Units are expected to outpace houses as affordability pressures, migration patterns, and weak apartment completion volumes intensify competition in the city apartment markets.

“While Sydney and Melbourne are expected to record relatively softer growth, Perth is well-equipped to lead the pack as the city develops a more sizeable dwelling stock deficiency.”

Rate cuts could mean game on for refinancing 

Refinancing largely stabilised in November after three months of steep declines.

The value of refinanced mortgages rose slightly in the month of November, lifting by a modest $121 million – the first increase in four months.

RateCity.com.au research director, Sally Tindall, said that while we’re now well past the peak in refinancing, the value of mortgages switching each month is still at elevated levels.

“Rock bottom rates in 2021 might have shone a spotlight on refinancing, but the rising cash rate has been the blowtorch that’s spurred many borrowers into action.

“The latest ABS data shows over 700,000 mortgages have refinanced since the start of the rate hikes, switching more than $360 billion worth of loans.

“Refinancing could well drop further in the first half of 2024, however, if we do see cash rate cuts later in the year it could be game on for some borrowers ready for their next move.

“It’s fantastic to see first home buyer numbers rising again in the month of November, despite rising rates and property prices.

Total value of refinancing - November 2023

“These numbers are likely to lift further in 2024, particularly when the government’s much touted Help to Buy scheme finally gets up and running.

“While this scheme will help lower-income first home buyers on to the property ladder without having to shackle themselves to super-sized debts, the places in this scheme are set to be capped at just 10,000 per year, which is unlikely to be enough to cater for the potential demand,” she said.

Article Q&A

Who are the most active buyers of Australian property?

The value of new loan commitments for investors was rising higher than owner-occupier borrowers. Investment lending increased by 18 per cent to reach $9.72 billion while owner-occupier new loan commitments were up only 10.6 per cent over the year to reach $17.86 billion in loans. But it was first home buyer activity that stood out, with a 25.8 per cent increase in the value of new loan commitments for first-time buyers.

Which states have the most new loan activity?

ABS data shows new loan commitments in Queensland rose 3.3 per cent, Victoria rose 2.0 per cent, South Australia rose 6.9 per cent, in the Australian Capital Territory rose 9.4 per cent and in the Northern Territory rose 6.0 per cent while New South Wales fell 1.1 per cent, in Western Australia fell 2.9 per cent and Tasmania fell 15.2 per cent.