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Brokers reveal why investor lending is the new growth market

by Charlotte Humphrys12 minute read

With investor lending having grown 30 per cent in a year, brokers have suggested that borrowing capacity constraints are a leading factor.

The Australian Bureau of Statistics (ABS) revealed its monthly Lending Indicators yesterday (8 July), which showed that while the total value of new housing loans fell over the month of May, investor loan growth has been outpacing owner-occupiers.

According to the data, investor lending increased 29.5 per cent in the year to May 2024 across Australia, compared to 12.2 per cent growth in owner-occupied lending year on year.

While the total value of all new mortgage lending fell over the month to May (to $28.8 billion), overall values were up 18 per cent year on year.


The ABS’ head of finance statistics Fiona Cotsell noted that "loans to investors have continued to see stronger growth than owner-occupiers over this period."

There was a total of $10.7 billion of investor loans written in May 2024, according to the ABS.

WA and QLD leading the way for investor loans

Investor lending increased across states in May except for NSW, which had a reduction in investor lending of 9.9 per cent (down to $3.98 billion from $4.38 billion).

Cotsell said that the value of new loans for investors reached a record high of $2.4 billion in Queensland, with the state now exceeding Victoria for the third month in a row.

However, when looking across the states at investor lending growth over the year, investor lending by a whopping 73.9 per cent in Western Australia, and 48.2 per cent in Queensland.

The head of finance statistics said: “This is mainly due to investors taking out larger loans in the Sunshine State compared to this time last year.”

She said that the average loan size for investors in Queensland increased by 14.3 per cent in the year to May 2023, from $508,000 to $580,000. At the same time, the average loan size in Victoria fell 3.2 per cent in the same period, from $584,000 to $566,000.

Even the most expensive state for property (NSW) saw the value of investor lending increase by 24.8 per cent since May 2023.

Serviceability a key issue

Speaking with The Adviser, Jackson Wong, a mortgage broker with Aussie Home Loans, said that he had noticed an uptick in investor lending as owner-occupiers struggle with borrowing capacity constraints.

The mortgage broker said that owner-occupiers and first-home buyers are battling against a reduction in borrowing power and have had to use the majority of their savings for a deposit and other upfront expenses.

However, investors are “positioned very differently in the market” as they are more likely to be in a stronger wealth and equity position and can also benefit from more readily accessing interest-only loans.

Adam Donald, a Western Australian-based mortgage broker from Capita Finance, also noted a significant increase in investor lending.

He said that many people living in Western Australia have started to realise equity following a "boom" in property prices and are looking to capitalise on low vacancy rates and high rental yields as Western Australia’s population continues to grow.

Increased investor lending, however, has not been noticed across the states, with Victoria particularly hard hit.

Jacob Decru, director and mortgage broker at Loan Market Connect in Victoria, told The Adviser that he had noticed investor demand slowing down, particularly as land tax remains expensive in the state.

Unlike the national trend, Decru said that interest in mortgages from Victorian owner-occupier borrowers had increased.

Decru said: “For Victoria, I would say that people are thinking twice around investing at the moment. I’m not saying that stopped, we feel like it’s slowing down.”

In fact, the Loan Market Connect broker said that he had noticed an increase in Victorian investors looking interstate, particularly in Brisbane and Perth, to purchase an investment property - adding he had never seen such an increase in interstate investment before.

Will owner-occupier growth increase in FY25?

However, as recent research from Aussie has suggested, borrowing capacity may lift with the introduction of the Stage 3 tax cuts, which came into effect on 1 July 2024.

Indeed, ANZ’s senior economist Blair Chapman said: “Ongoing positive real wage growth and tax cuts should see borrowing capacity rise further, which combined with continued housing price growth, should see loan sizes grow again in coming months.”

[Related: Miles government pledges to review property taxes]

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