Investors, First Home Buyers Drive 12pc Rebound in Lending

A promising uptick in investor lending and a surge in first home buyer loans has bolstered home loan activity, with approvals booming 12 per cent over the last three months.

The solid results, released by the ABS last week, shows that consecutive rate cuts combined with an easing in lending standards has started to reverse one of the largest lending slumps in history.

The figures from August showed investor lending spiking 5.7 per cent, while first home buyers rose 5.9 per cent to take 19.6 per cent of the market—the highest share since the GFC.

Owner-occupiers grew a more subdued 2.1 per cent over the month.

The lending surge is still yet to translate into actual building activity, UBS analysts pointed out, with volatile “developer” loans—construction and the purchase of real property—falling a further 10 per cent.

“[Which] indicates limited spill over from strong established housing prices to still weakening new housing activity,” UBS economist George Tharenou said.

The 12 per cent rebound in home loans in the three months to August lifted house prices 10 per cent, in line with UBS’ revised outlook for the year. The bank had previously flagged a more modest recovery of 5 per cent.

“This reinforces our view of a ‘mini-boom’ for loans toward 20 per cent year-on-year and prices nearing a 10 per cent [rise], especially with the RBA likely to keep cutting,” Tharenou said.

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Despite a slight uplift in construction activity according to the latest building figures, Tharenou still expects that the construction downturn is yet to reach its trough.

The construction slump—sitting at around 33 per cent from peak-to-trough to date—has been wider than expected.

HIA economist Tom Devitt said that the full effect of coordinated policy easing by APRA and the RBA is yet to play out.

“Given the lag between home loan applications and final approval, it is likely that the full effects of recent stimulus [will] provide further support to the market as the year progresses.”