Australian home loans to investors jump as yields soar amid rental crisis

Australian home loans to property investors jumped for a third-straight month in April, rising at a faster pace than owner-occupiers as surging residential rents make housing an even more attractive investment.

The value of new loans to home investors rose 5.6 per cent to $10.9 billion, to be up 36.1 per cent compared with a year ago, data from the Australian Bureau of Statistics showed on Thursday.

“Lending to investors continued to rise strongly relative to owner-occupiers, driven by increasing loan sizes,” Mish Tan, head of finance statistics at the ABS, said.

“This likely reflects expectations of higher rental yields and the greater borrowing capacity of investors.”

In original terms, the average size of an investor loan for the purchase of an existing home grew 9.5 per cent since April 2023, from $592,000 to $648,000. In comparison, the average loan size for an owner‑occupier first-homebuyer grew 6.8 per cent, from $498,000 to $532,000 over the same period.

The strongest markets were New South Wales and Queensland where investor lending climbed about 44 per cent and 46 per cent, respectively, since April 2023, the data showed.

Separate figures from property consultancy CoreLogic earlier this month showed rents advanced 8.9 per cent in Sydney in May from a year ago and 9.7 per cent in Melbourne. That compares with annual house price gains of 7.4 per cent and 1.8 per cent in the two biggest cities, respectively.

According to the latest PropTrack report, released on Thursday, Perth’s vacancy rate rose by 0.1 percentage points in May and 0.4 percentage points over the quarter, bringing some much needed relief to renters.

With rents climbing at a faster pace than home values, gross rental yields have risen to 3.56 per cent across the eight capital cities — the highest since August 2019, CoreLogic data showed.

“For most investors, higher yields will be welcome considering variable interest rates for investor loans are averaging 6.7 per cent,” CoreLogic research director Tim Lawless said.

“Given the high cost of debt, a large portion of leveraged investors are probably recording a cash flow loss despite the substantial rise in rental income.”

Today’s data also showed the value of new loans to owner-occupiers, excluding first-homebuyers, rose 4.7 per cent in April to $13.1b, up 18.8 per cent from a year ago.

Bloomberg