INVESTORS PILE INTO PROPERTY

April 11, 2007 11:50am
Article from: AAP

• New home loans hit $20.9bn in February
• Growth adds to rate pressure
• Investors piled $6.6bn into property loans

MORE Australians took out a housing loan in February than in the previous month, indicating last year's interest rate rises have done little to curb borrowing, raising the chance of rate hike.

The Australian Bureau of Statistics housing finance report for February released today showed loan commitments for owner occupied housing rose by 0.3 per cent in February, seasonally adjusted, to 62,369.

Total housing finance by value rose 3.3 per cent in February, seasonally adjusted, to $20.852 billion.
The report continues a long run of upbeat data suggesting the central bank may be forced to lift interest rates again to dampen inflation pressures, possibly as early as next month.

The number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell from 17.7 per cent in January 2007 to 17.5 per cent in February 2007.

The number of fixed-rate loan commitments as a percentage of total owner occupied housing finance commitments dipped 20.5 per cent in January 2007 to 20.4 per cent in February 2007.
Investors lured back
Rising rental yields tempted investors back into the property market.

ANZ head of financial system analysis Paul Braddick said lending to investors drove the firm result for February.

"The number was quite strong, driven by another surge in investor housing loans, and that's consistent with our expectations that investors will be pulled back into the market this year by the dramatic tightening of rental vacancies that we're seeing across most capital cities," he said.

"This is driving rents significantly higher, and therefore improving investor yields."

Investor finance accounted for 8.9 per cent of the total value of loans at $6.594 billion, seasonally adjusted.

However, the value of housing finance for owner occupied housing rose at a much softer pace of 0.9 per cent to $14.257 billion.

Mr Braddick said the owner occupier market was most likely still being impacted my the three interest rate rises in 2006 as well as expectations of more rate rises to come.