House prices rise, investors return – but here’s why we don’t need a lending clampdown.

Investors are returning to the property market – but a boil-over seems a long way off.

Recent figures from Corelogic shows investors as the fastest growth segment, increasingly outmuscling First Home Buyers.

For the fifth month in a row First Home Buyers’ market share dropped.

But owner occupiers remained the largest market segment at 52.5 per cent.

But, while the headlines may indicate there is an overheating market with hoards of speculators rushing in, this is far from the truth.

First Home Buyers constitute 21.5 per cent of total borrowings for the purchase of property over April- well above the decade average of 15.7 per cent. 

And banks have maintained prudent lending standards.

The portion of those riskier loans with a loan-to-valuation ratio of greater than or equal to 90% actually fell – from 11.3 per cent to 10.4 per cent.

And, while the portion of lending on interest only terms ticked up 10 basis points in the to 19.4 per cent, it remains well below the 46 per cent peak in 2015. 

Origin brokers talk to banks daily and we know that they are reluctant to relax lending standard – hence debt-to-income ratios have only risen slightly – more in line the rise in house prices of the past six months than any risky behaviour from lenders.

This weekend’s clearance rate, while strong, were hardly crash-hot. Melbourne’s preliminary auction clearance rate slumped to 62 per cent and Sydney was 74 per cent.  These figures typically imply that buyers are hardly clamouring to purchase a property at all cost.

There’s no doubt prices will continue to increase, but with banks restricting how much they will lend – and with fixed rates starting to inch up, it’s hard to see would-be buyers being able to stretch things much further.