Housing finance loan to investors for construction at $12.419 billion up 35.4%

Although owner-occupiers continue to hold the largest share of the value of housing loan approvals, their influence has continued to wane, with most growth being experienced in loans to investors for construction. For the year-ended March 2016, the value of total approvals was AUD47.372 billion, up 12.9% on the prior year.

However, as the chart below shows, the growth was dominated by loans to investors for construction and to a lesser extent, by rising loans to owner-occupiers for purchasing existing dwellings. 


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The single largest segment – loans to owner-occupiers for construction of new dwellings – actually declined over the year to the end of March, falling a small but relevant 0.1% to AUD21.420 billion. For the year-ended March 2015, loans to owner-occupiers accounted for 51.1% of the total value of housing loans approved. A year later, that proportion had fallen to 45.2%, underscoring where the growth in loans has come from.

The value of loans to owner-occupiers purchasing existing dwellings grew 17.7% over the year-ended March 2016, totaling AUD13.486 billion. However, the proportion of total loans went from 27.3% to 28.5% over the year.

Investors were the big movers in all senses related to housing loans. Rising 37.5% on the prior year, the value of loans to investors for new construction reached AUD12.466 billion. Their share of the national loan book for the year ended March 2016 jumped from 21.6% to 26.3%.

Drivers for what amounts to the change in the ratios of loans are not difficult to discern. Pent up demand for new free-standing dwellings had been strong but began to dissipate earlier. They appear to have peaked. 

For owner-occupier purchases of existing dwellings, there are several potential and probably inter-linked drivers. Inter-generational change is occurring as baby boomers age and downsize. Owners that have booked large capital growth gains are cashing in. Higher prices flow through to ‘like-for-like’ purchases. These can all contribute to increased loan valuations.

Investor loans for construction have a different set of drivers again. They have expanded as apartment approvals have expanded. It is investors and their relationship to the larger apartment buildings that is really beginning to bother the regulators.