Australian property investor borrowing has surged at the fastest rate in a decade, new data shows, defying expectations that rising interest rates would cool the market.
Investor lending jumps
According to the Australian Bureau of Statistics, the value of new loans to property investors rose by 5.2% in March, the largest monthly increase since 2016. This brings the total value of investor loans to $12.3 billion, the highest level since April 2022.
The rise comes despite the Reserve Bank of Australia having raised interest rates 13 times since May 2022, taking the cash rate to 4.35%. Many economists had predicted that higher borrowing costs would dampen investor demand, but the latest figures suggest otherwise.
Drivers behind the surge
Analysts point to several factors driving the increase. Rental yields have improved, with national rents rising by 8.3% over the past year, making property investment more attractive. Additionally, expectations that interest rates may have peaked have encouraged some investors to enter the market.
"We're seeing a renewed confidence among property investors," said Tim Lawless, research director at CoreLogic. "With rents rising and the possibility of rate cuts later this year, investors are jumping back in."
The surge in investor activity has raised concerns about housing affordability for first-home buyers. The number of loans to owner-occupiers rose by only 1.1% in March, suggesting that investors are outcompeting those trying to get onto the property ladder.
Market implications
Housing advocacy groups have called on the government to take action. "This is deeply troubling," said Sarah Toohey, CEO of the Housing Industry Association. "Investors are crowding out first-home buyers, and the government needs to step in to level the playing field."
The Reserve Bank is due to meet next week to decide on interest rates. While most economists expect rates to remain on hold, the strong investor borrowing figures could prompt a more hawkish stance.
Property prices have also been rising, with national home values up 0.6% in April, according to CoreLogic. Sydney and Melbourne recorded gains of 0.8% and 0.5% respectively.
The trend is not limited to Australia. Similar patterns have been observed in other countries, such as the UK and US, where investor borrowing has increased despite higher interest rates.
