The end of 2024 marked a complex period for the Australian housing finance sector, with distinct trends emerging between owner-occupier and investor lending.
The Australian Bureau of Statistics (ABS) reported that while new home loans excluding refinancing rose for the third consecutive quarter, the number of new investment loans saw a decline, the first since early 2023.
Owner-occupier lending continued to anchor the market, with Neha Sharma (pictured above left) of Westpac noting, “The quarterly gain was primarily driven by loans to owner-occupiers, which climbed 4.2% in value terms.”
This sector saw an increase to 83,206 new home loans approved in the December quarter, a 2.2% rise from the previous quarter, culminating in a total value of $54.8 billion, which is indicative of the sector’s robustness despite broader market shifts.
Conversely, investor lending retracted significantly.
Eleanor Creagh (pictured above centre), senior economist at PropTrack, highlighted the reduction in investor confidence.
“The value of new loan commitments to investors fell for the first time in almost two years, a downturn that follows a record high in the previous quarter,” Creagh said. “This quarter saw 48,876 new investment loans approved, marking a 4.5% decrease, with the total value of these loans dropping to $32.4 billion.”
Mish Tan (pictured above right) of the ABS provided further insights into the regional and economic factors affecting the housing finance landscape.
“While the number of new home loans rose in the December quarter, New South Wales partially offset this growth, falling 2.3%,” Tan said.
She also noted significant year-over-year increases in the value of new home loans, particularly in Queensland, Victoria, and New South Wales, despite the broader slowdown.
The housing finance market is poised for further evolution, with potential interest rate cuts on the horizon that could stimulate activity.
Sharma anticipates these adjustments could maintain the momentum built since early 2023, suggesting a possible revitalisation in both owner-occupier and investor sectors depending on economic conditions.
As the economic landscape continues to evolve, the Australian housing finance sector is navigating through a period of adjustment.
The resilience demonstrated by owner-occupiers provides a stable foundation, yet the pullback in investor lending highlights the market’s sensitivity to economic shifts. The expected changes in interest rates and ongoing economic developments will likely play critical roles in shaping the market dynamics as we move further into 2025.
