Lending restrictions blamed for keeping investor activity subdued

By Bianca Dabu 07 April 2021 | 1 minute read

Although the housing market is booming, with strong buyer demand now pushing up house prices at the highest rate in years, investor activity remains subdued.

Lending restrictions blamed for keeping investor lending subdued

Despite an overall increase in investor activity in February, the rate of growth was the lowest in four months, suggesting that investors are still largely on the sidelines of the booming housing market, new ABS data has revealed.

According to Archistar’s latest research, while investor loans increased by 4.5 per cent and peaked at $6.9 billion in February – the highest sum since February 2018 – they accounted for just 20.25 per cent of total home lending, sitting below the 20.4 per cent market share for first home buyers.

Moreover, the average long-term residential loan market share for investors stood at 33.3 per cent, with the February total still 31.0 per cent lower than the record $10.1 billion approved over April 2015 during similar strong market conditions.

Archistar’s chief economist, Dr Andrew Wilson, attributed this negative trend to ongoing lending restrictions.


“Finance constraints remain a significant barrier to investor activity, with that group continuing to pay higher interest rates compared to owner-occupiers with a current differential of 0.58 per cent, according to the RBA,” Dr Wilson explained.

He argued that ongoing lending restrictions to investors have significant longer-term implications for housing supply and general economic growth.

“Although investor activity is revived, dragged along by booming housing markets, underlying levels remain clearly at record lows,” Dr Wilson added.

Looking at investor activity across the states, Victoria topped the ladder with an increase of 13.1 per cent. It was followed by South Australia (6.5 per cent), Western Australia (5.2 per cent), Queensland (1.5 per cent) and NSW (1.4 per cent).

Lending for home purchases, on the other hand, remained at record levels over February, with all states reporting strong results.

This was supported by recent figures from the ABS, which reported home loan values sitting at $33.8 billion – the second highest monthly result on record.

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Lending restrictions blamed for keeping investor activity subdued
Lending restrictions blamed for keeping investor lending subdued
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