Investors are taking on record levels of housing finance as first home buyers struggle to enter the growing property market.
First home buyer loan approvals fell to a record low in Victoria in October but in NSW they rose slightly from their record low, Bureau of Statistics data released on Tuesday showed.
A National Australia Bank survey has found that business conditions remained weak last month, and companies' confidence levels edged lower as improving trading conditions were offset by a weakening labour market.
Home loan approvals for owner-occupiers rose a seasonally adjusted 1 per cent in October to 52,305 across Australia.
First home buyer activity as a proportion of total borrowers rose from a record low of 12.5 per cent in September, but remained subdued at 12.6 per cent in October. In Victoria, first home buyers made up 11.7 per cent of new housing loan commitments, the lowest proportion since records began in 1991. The previous record low was 12.2 per cent in September.
First home buyer activity improved slightly in NSW in October, reaching 7.4 per cent for the month from a record low of 6.8 per cent in September.
The overall value of home loans increased 4.1 per cent in October to $26.5 billion, driven by a strong rise in investor activity.
The value of investment loans jumped 8.2 per cent for the month to $10.3 billion - the highest level on record. The value of owner-occupied loans rose 1.7 per cent.
The lift in investor activity was a "significant step-up ... worthy of further monitoring", Westpac senior economist Matthew Hassan said, adding that the value of investor home loans rose by an annualised rate of 47 per cent over the past six months. Housing construction finance expanded 1 per cent in October.
The Reserve Bank has been looking for a rise in activity in non-mining sectors such as housing construction to fill the gap left by an expected decline in resources investment. ANZ property analysts David Cannington and Paul Braddick said the strong growth in building approvals, together with record-low interest rates and recent home price rises would support further activity in housing construction.
However, rising investor activity, coupled with the sluggish growth in lending to first home buyers and soft business conditions, would be of concern to the central bank, Citi economists Paul Brennan and Josh Williamson said.
NAB economists continue to forecast an interest rate cut by the RBA in May, with a further easing of monetary policy dependent on the strength of the labour market.