Aussie investors are borrowing so much money to buy homes, they might soon trigger a Reserve Bank or prudential regulator crack down.
Aussie investors could soon face government controls after driving a record $98bn in property loans in the past three months — almost as much as some European nations make in a year.
The unprecedented borrowing, led by investors, has economists warning the nation’s banking regulator could be just months away from slamming the brakes on would-be landlords.
Between July 1 and September 30 Australian property purchasers borrowed almost as much money as the annual gross domestic product of nations including Luxemburg and Serbia, based on International Monetary Fund figures released this year.
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The whopping figure is up by about $11.5bn (13.2 per cent) compared to a year ago, and was revealed for the September quarter in Australian Bureau of Statistics data released yesterday.
Average home loan sizes are also now at record levels in most states.
The ABS stats show NSW homebuyers are borrowing $828,000 on average, followed by Queenslanders taking out a typical $687,000 loan.
Victorians were next at $647,000, then WA at $633,000, and South Australia at $616,000.
The ACT and Northern Territory both has small falls in loan sizes in the last quarter, down slightly to $628,000 for the ACT and $481,000 for the NT.
Tasmanian loans were essentially flat at $484,000.
The massive uptick follows interest rate cuts from the Reserve Bank of Australia in February, May and August.
Aussie home lending typical mortgage size by state. Supplied: ABS.
The ABS data also shows that 141,470 Aussies took out a new home or property investment loan in the past quarter, with investors accounting for 57,624 of them, outpacing non-first-home buyers who covered 55,171.
Investors are also a huge force in dollar terms, with $39.8bn of the $98bn national figure going to would-be landlords.
Byt contrast, there were fewer than 30,000 first-home buyer loans issued in the timeline, and they only accounted for $16.5bn of the nations borrowing.
AMP Capital economist Shane Oliver warned that with investors now accounting for more than 40 per cent of the nation’s home lending by value, levels not seen in more than a decade, the nation’s regulators might soon try to rein them in.
AMP chief economist Shane Oliver has warned property investors might soon face further regulation.
“It’s quite possible APRA (Australian Prudential Regulation Authority) and financial regulators including the RBA might return to macro-prudential controls,” Mr Oliver said.
In the past this has led to investors facing higher interest rates, caps on high debt ratio lending and even the 3 per cent margin that homebuyers must now demonstrate they can pay above what they want to borrow.
“I don’t think we will see a rate hike,” Mr Oliver said.
“But you might see something targetting investors specifically. If there’s too much lending to investors they tend to get worried that the market will become too speculative.
“And it’s certainly a concern that the market is becoming less balanced again.”
Asked when APRA or the RBA might take action, the economist said he would think in the first half of next year if current figures are perpetuated in the next few quarters.
“I don’t think we are quite there yet, but we might hear some more rumbling about it soon,” Mr Oliver said.
Surging home prices and declining interest rates have turbocharged Aussie borrowing.
And with first-home buyers barely a blip in the huge surge in lending data, with many likely to have been waiting to cash in on the federal government’s expanded First Home Guarantee from October, experts are predicting the nation will blast past the $100bn figure before the end of this year.
The ABS data shows that 141,470 Aussies took out a new home or property investment loan in the past quarter, with investors accounting for 57,624 of them, outpacing non-first-home buyers who covered 55,171.
There were fewer than 30,000 first-home buyer loans issued in the timeline, and they only accounted for $16.5bn of the nations borrowing.
With Australia’s new home loan numbers falling short of a record, Oxford Economics Australia senior economist Maree Kilroy said the unprecedented lending value showed Australians had been forced to increase their borrowing to chase rising home prices.
“That value is a record, but it’s not quite for the volume of loans,” Ms Kilroy said.
“And that means the average loan size has increased. So it’s really prices that are driving that big jump.”
Oxford Economics senior economist Maree Kilroy said the value of loans issued in the last quarter was a record, but likely to be quickly surpassed.
The economist said the “accumulation of rate cuts” as well as the First Home Guarantee had now set the tone for an even bigger surge before the end of this year.
“We expect that the next quarter will show really strong increases (for first-home buyers), though it might not beat out investors — though it could be double digit quarterly growth for both,” Ms Kilroy said.
“The next data will be boosted by first-home buyers as the New Home Guarantee changes kick in.
“I think that will be exceeding $100bn in this quarter.”
She added that while the unprecedented level of borrowing was high, it appeared the nation’s banks and the Australian Prudential Regulation Authority felt that Aussie homebuyers could handle the debt — as there had been no changes to lending policies signalling concern.
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