First home buyer loans decline in NSW, while investor loans increase nationwide

First home buyer loan approvals fell seven per cent across September in NSW, where values are most expensive.

Nationally, measured by year-on-year (YoY), new home loan approvals fell 0.6 per cent.

This occurred even as new investor loan commitments for housing increased by two per cent in September.

The news ultimately paints a bleak picture – Australia’s property divide is becoming more entrenched in the inflationary environment.

Mixed story

The data from today is mixed. Looking at the YoY data, new investor loans reflect an increase of 2.6 per cent.

But that’s only for those with existing property portfolios, or, those seeking a lender to buy a property as an investment – not to live inside.

“Since February 2023, the value of new housing loan commitments have trended upwards, with total growth in investor loans exceeding owner-occupier loans,” ABS Head of Finance Statistics Mish Tan said.

“That said, the total value of new housing loan commitments in recent months remains below the all‑time highs seen throughout the COVID-19 pandemic.”

Bad news for first buyers

The two per cent increase clocked in September was grown by loan approvals to property investors in Victoria ($127 million increase) and NSW ($77 million increase).

The disparity between values in VIC and NSW is noteworthy and further adds to the notion NSW’s luxury-valued property market is driving investors elsewhere. Some, but not all.

First-home buyer loans, however, were far more flat across the country.

In aggregate, the class of loans only increased by 0.5 per cent in September, as opposed to those loans accessed by investors with existing property portfolios.

Economists watching closely

Oxford Economics Senior Economist for Australia Maree Kilroy’s analysis read as being more challenging than that offered by the ABS’s Misha Tan.

Ms Kilroy expects many Australians to continue struggling with loans through FY24.

“External refinancing took a sizeable fall, down 7.8 per cent for the month … we expect refinancing to remain elevated through FY2024,” she said.

“The re-instated first home buyer data revealed only 9213 loans were approved in September (up 0.5 per cent).”

No end to price creep

Ms Kilroy also pointed out that house prices in Australia continue to climb in all capital cities.

Property is also the single biggest factor in Australia driving up national inflation.

“Capital city property prices have exceeded or are near surpassing record highs with price growth continuing in October,” she said.

“However, the strength of buyer demand is being tested.”

Ms Kilroy noted a climb in Q3 inflation points towards another RBA hike.

“This will compound affordability pressures into the new year, especially for first home buyers.”

All eyes are on the RBA’s November decision, where the cash rate hasn’t been moved since June.

Many economists – including Oxford Economics’ Sean Langcake, and City Index’s Matt Simpson – expect to be met with a 25bps rise.

This also correlates with analysis from both Citigroup and Morgan Stanley.