Investor lending grew significantly in August, mostly driven by first-time property investors, market watchers said.
Recent data from the Australian Bureau of Statistics show that lending commitments for investment dwellings grew by 5.7%, the most substantial month-on-month increase in almost three years. The growth was due to the increasing presence of new investors breaking into the market, said Your Finance Adviser lending specialist Raj Khatak.
"We're seeing a lot of new investors coming in, encouraged by the lower interest rates, and they're getting their loans approved far easier than existing investors," he told The Australian Financial Review.
He said investors with already-established portfolios were "out of the market" as they got hit with stricter assessment policies.
"I have five investment properties, and despite the lower assessment rates, my servicing capacity still falls short, so I'm out of the market. I'm going to be out of the market unless my income goes up substantially, which I don't see happening in this environment anyway," Khatak said.
Banks appear to be strengthening their serviceability requirements for investors with multiple properties. In fact, some lenders have already lowered the proportion of rental income they consider when calculating borrowing capacity, from 80% to 70%.
"This means investors with multiple properties are already behind the eight ball on borrowing capacity compared to new investors," Rise High Financial Solutions mortgage broker Marissa Schulze told AFR.
Schulze said applying for loans is harder for those investors who have already maxed out their borrowing capacity and are unable to refinance their interest-only loans.
Mark Hewitt, a broker at AFG, said newer investors typically get their applications approved because their applications are simpler than those of established investors.
"I think for someone buying their first investment property, and they already own their home, it's a simpler transaction to look at for lenders compared to someone who has multiple investment properties. The more properties you have, the higher your borrowing and this makes you a higher risk for the banks," he told the AFR.
Given the tighter lending market, established investors resort to asking help from smaller lenders for a higher chance of getting approved. In fact, data from AFG show that the share of loans between major and non-major banks is close to reaching a 50%-50% split.
