Investors set to pounce on property market

The latest mortgage data from the Australian Bureau of Statistics (ABS) shows that investors are beginning to take-over from first home buyers (FHB) in driving property demand.

Investor mortgage commitments surged 29% over the first three months of 2021 and are now clearly crowding-out FHBs:

Mortgage share

Investors are once again crowding-out first home buyers.

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Investor mortgage growth is now turbo charged, as illustrated by the delayed sharp 54% lift in investor mortgage commitments in the year to March:

Mortgage growth by component

Investor mortgage growth has rebounded hard.

One of Australia’s biggest mortgage brokers, AFG, expects investors to continue flooding the market, taking the reins from FHBs:

“Coming through the other side of the pandemic … my view is that as first home buyers — particularly who look at apartments and smaller places and so forth — come out of the market, that volume will probably be replaced by investors,” [chief executive David Bailey] said.

The chairman of the Australian Prudential Regulation Authority (APRA), Wayne Byres, also said on Wednesday he expected investors would continue returning to the housing market…

“Certainly the commitments to investors had been very low through 2020, but they’ve started to pick up again in recent months, so I think we’ll see them start to come back to the market”…

The investor mortgage boom could also run for a long time, given the value of investor mortgage commitments still remains way below the decade average, according to CoreLogic:

Investor mortgage demand

Lots of upside for investor mortgage demand.

The big question mark is whether the regulators will step in to crimp investor lending via macro-prudential tools?

CoreLogic’s latest Monthly chart pack showed a marked deterioration in lending standards in the final quarter of 2020 – something that has likely worsened since:

Australian mortgage lending standards

Mortgage lending standards clearly deteriorated at the end of 2020.

Personally, I can’t see regulators taking any action before next year’s federal election. The Morrison Government wants responsible lending rules axed and has already neutered ASIC. APRA has also played down speculation that it will intervene in the housing market.

Let it rip!

Unconventional Economist
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