One of the most notable aspects of the recent uplift in home prices is the prevalence of investor activity, which appears to be crowding-out first home buyers (FHBs).
As reported yesterday, the AFG housing finance data for August showed the share of mortgages commitments going to investors rising to 38.7% in August, whereas the FHB share slumped to just 11.3% (see next chart), with investors in New South Wales accounting for a whopping one in every two mortgages taken-out in the state over the month.
AFG only comprises around 10% to 15% of the mortgage market, so its figures are certainly not definitive. Yet, the latest statistics from the other main data sources for housing-related finance – namely the RBA credit aggregates and the ABS housing finance commitments – also show a surge in investor activity.
As shown below, the RBA credit aggregate data for July, released on Friday, showed a continued shift in credit growth to property investors. Annual credit growth for this cohort increased to 5.8% in July, which represented a two year high and was well above the 4.1% annual growth recorded for owner-occupiers (see next chart).
It’s a similar story for the ABS housing finance data for June, which continued to show strong growth in investor mortgage demand and corresponding weakness in demand from FHBs (see next chart).
What is clear from the macro data is that this is an investor-led housing recovery, likely brought about by financial repression from near record low nominal interest rates, which has driven down returns on fixed interest and pushed investors into higher yielding property.
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