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Investors outpacing first home buyers

AAP logoAAP 9/12/2016 Marty Silk

First home buyer numbers continue to dwindle, and a fall in loans for the construction of new homes signals the building boom will soon wind down, economists say.

Home loan approval numbers fell 0.8 per cent in October, a slightly smaller fall than the 1.0 per cent decline the market expected.

The value of loans approved for owner-occupied housing fell 0.8 per cent in October, and loans for investment housing rose 0.7 per cent.

Investors are once again the main drivers of activity in the housing market, Commonwealth Bank senior economist Kristina Clifton said.

"Approvals to investors have increased this year and now outpace loans to owner-occupiers," she said.

"The two interest rate cuts this year have reduced financing costs and increased the attractiveness of property investment. On the other hand, approvals to owner-occupiers are slowing and first home buyers continue to account for a smaller share of new loans."

ANZ economists said investor enthusiasm was not extending to new dwellings, with finance for the construction of new homes trending lower for six months to hit its lowest level in over two years in October.

"This decline, combined with the recent drop in building approvals, support our view that we are around the peak in housing construction, and will see investment fall through 2017," they said in note.

CommSec chief economist Craig James said October's decline in home loans was interesting given the big four banks are raising some of their mortgage rates.

"With borrowers now looking more carefully at the market, competition across lenders looks likely to heat up," he said.

The home finance market will not be a major influence on the Reserve Bank's interest rates decisions, Mr James added.

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