Australian homes worth $5 trillion as investors hit 10-year high

Updated

Investors are now making up the biggest share of new mortgages in more than a decade, while first home buyers remain sidelined.

The Bureau of Statistics housing finance figures for December show investors now account for 39.8 per cent of the value of home loans issued in December.

That is the highest proportion of loans going to investors since October 2003, during the height of Australia's largest recent housing boom.

JP Morgan economist Tom Kennedy says it was not long after this previous peak in housing investor borrowing that the Reserve Bank started lifting interest rates.

"We see a similar response by the RBA as very unlikely in the current environment, however, with rising unemployment, sub-trend growth, low overall credit growth and benign wage outcomes ensuring that rate hikes should not be forthcoming this year," he wrote in a note on the data.

RP Data real estate analyst Cameron Kusher says the rise in investor lending, up 40.7 per cent over the past year, is not sustainable and should worry financial regulators.

"I said some months ago that if investors as a proportion get back up to near previous peaks it was danger territory, we're clearly now there," he wrote on Twitter.

"I think APRA [the Australian Prudential Regulation Authority] is reluctant to introduce macroprudential [tools] but I think there will be plenty of closed door discussions with banks."

There has been increasing discussion about the desirability of placing limits on the amount of money banks can lend relative to the value of the property, as was done in New Zealand last year.

One of the criticisms of the New Zealand rules, however, is that they can disproportionately affect first home buyers, who often have to borrow more money than investors or upgraders to buy.

The proportion of first home buyers amongst owner-occupiers remains near record lows at 12.7 per cent, even though it rose slightly in December compared to November's 12.3 per cent.

Overall, a 1.5 per cent fall in the value of loans to owner-occupiers meant that the value of home lending rose just 0.2 per cent in December, with the number of new loans to owner-occupiers down 1.9 per cent.

Surging house prices

Mr Kennedy says rising home prices are a key reason why first time buyers are staying out of the property market.

"The ABS house price index, also released today, highlights some of the challenges facing these buyers, with prices across Australia's eight capital cities climbing a further 3.4 per cent in the final quarter of 2013," he added.

The official figures show home prices climbed 9.3 per cent last year, with the ABS figures for the first time looking at all residential properties, not just detached houses.

Sydney had the biggest quarterly (4.7 per cent) and annual (13.8 per cent) growth, with Perth up 8.7 per cent in 2013 and Melbourne 7.9 per cent.

Brisbane (5.7 per cent), Darwin (5 per cent), Hobart (4.9 per cent) and Adelaide (3.4 per cent) posted more moderate annual gains, while Canberra home prices slipped 0.3 per cent over 2013.

The Bureau of Statistics also added a new separate measure of attached dwelling prices (including apartments), which shows growth generally lagged that of detached houses in 2013.

Sydney had the steepest quarterly rise at the end of last year of 4.4 per cent, while every other capital city had smaller gains except for Darwin where unit prices were down 0.4 per cent.

The ABS says the total value of Australia's 9.3 million residential properties is $5.02 trillion, with an average price of $539,400.

Topics: business-economics-and-finance, economic-trends, housing-industry, australia, nt

First posted