️ Highlights:
1. Overall mortgage commitments in Australia rose by 2.2% in August, with owner-occupier commitments increasing by 2.6% and investor mortgage commitments rising by 1.6%.
2. Over the past year, overall mortgage commitments have fallen by 9.4%, with owner-occupier commitments experiencing a significant drop of 12.5% and investor mortgage commitments falling by 3.0%.
3. The rebound in overall mortgage growth is being driven by investors, with the value of investor commitments almost reaching the peak seen in 2015.
4. Reports claiming that investors are leaving the housing market are contradicted by the data, as there are both investors selling and purchasing properties, creating a lot of investor churn in the market.
5. The situation for property investors is expected to improve in the coming year due to a tight rental market, booming population growth, rising prices, and low construction levels. Additionally, the Reserve Bank of Australia is likely to cut interest rates next year, making investment more profitable by reducing mortgage expenses and increasing price growth.
Executive Summary
The Australian Bureau of Statistics (ABS) recently published data on new mortgage originations for August 2023, revealing a significant resurgence in investor mortgage commitments. The data indicates that overall mortgage commitments increased by 2.2%, with owner-occupier commitments rising by 2.6% and investor mortgage commitments increasing by 1.6%. Contrary to recent reports suggesting that investors are exiting the housing market, the data shows that investor activity is robust and nearing its 2015 peak levels.
Yearly Trends in Mortgage Commitments
Over the past year, there has been a 9.4% decline in overall mortgage commitments. This decline is characterized by a 12.5% drop in owner-occupier commitments and a 3.0% decrease in investor mortgage commitments. Despite these annual declines, recent data suggests a strong rebound, particularly in investor mortgage commitments.
The Driving Force: Property Investors
The resurgence in overall mortgage growth is predominantly fueled by property investors. This contradicts prevailing narratives that suggest investors are retreating from the housing market. While there is a higher-than-average share of investors selling properties, the number of investors making purchases has also increased, resulting in considerable market churn.
Favorable Market Conditions
Several factors indicate that the investment landscape for property investors is likely to improve in the coming year:
- The rental market is experiencing unprecedented tightness.
- Population growth is accelerating.
- Property prices are on an upward trajectory.
- Construction activity is currently subdued.
Monetary Policy Outlook
The Reserve Bank of Australia (RBA) is expected to reduce interest rates in the coming year, which will enhance investment profitability by lowering mortgage expenses and stimulating price growth.
Conclusion
The recent ABS data underscores the resilience and reinvigoration of investor activity in the Australian mortgage market. With favorable market conditions and an anticipated easing of monetary policy, the outlook for property investors remains promising.