Investor loan lodgements are down by up to 44 per cent. What that changes if you have equity to use

Up to 44 per cent.

That is how far investor home loan lodgements have fallen, according to a Mortgage Professional report published this week under the headline "Property investors retreat as lodgements fall up to 44%".

A lodgement is a loan application a broker submits to a lender. It sits upstream of everything else in property. Before there is a contract there is a lodgement, and before there is a price index there are months of contracts. When investor lodgements fall by close to half at the top of the range, you are watching demand for investment property thin out well before it shows up in anyone's suburb median.

Read the words carefully. "Up to" means 44 per cent is the top of a range. For some lenders, some segments or some periods the fall will be smaller, and the report does not claim every investor in the country has stepped back. It still describes the largest retreat in investor finance most working-age Australians have seen.

What changed

Investors have stopped applying for loans at anything like the rate they were.

The report calls it a retreat, and the word fits. Whatever each household's reason, the aggregate effect is the same. A large share of the people who would normally be competing for established houses and units in investor-grade suburbs are, for now, not in the market.

That is the whole story in one line. Everything useful follows from it.

What it means if you have equity or cash

If you own a home with usable equity, or you have cash set aside and borrowing capacity to match, the headline is about you more than it is about the people it describes.

The buyers who left were your competition.

Take a simple illustration. If a particular property would have drawn ten investor enquiries a year ago, the top of the reported range implies something closer to five now. Fewer enquiries means fewer offers. Fewer offers means a vendor who has to listen to yours. It also means more time. Due diligence that used to be squeezed into a weekend can take the fortnight it deserves.

That is a genuine change in your position. For a time-poor household it may be the most valuable change of all, because the hardest part of buying well in a hot market was never the money. It was the lack of time to check.

None of this is a forecast. Nobody can tell you from a lodgement figure whether prices have bottomed, and anyone who claims to is selling something. The useful reading is narrower: the room at the table has emptied out, and you can decide what to do with that.

The decision and the trade-offs

There are two ways to respond, and both carry a cost.

The first is to wait. The argument is that if investors are retreating they know something, and clarity will arrive later. The cost is that clarity arrives for everyone at once. When the crowd returns, you pay the crowd's price and you are back to competing on speed rather than judgement.

The second is to buy because the crowd has gone. The cost here is subtler and more expensive. A thin market is thin for sellers too. If you buy the wrong asset in a thin market, there is nobody waiting to take it off your hands when you realise. The discount you were pleased with becomes the floor you are stuck on.

So the expensive mistake has a shape. It is buying the "bargain" in a street that investors deserted for good reason, then discovering the reason. Less competition changes your price. It does nothing to change the street.

Which leaves the better question. Can the specific property, in the specific street, carry itself at today's borrowing costs, with today's tenant demand, inside your actual balance sheet? If yes, a market with fewer rivals is a kinder place to make that purchase. If no, the lack of rivals is a trap.

Why structure beats timing

At Ripehouse Advisory we do not sell property, and we do not ask anyone to take our results on faith. We publish them, including the portfolios that underperformed. Across 997 client portfolios since 2021, the median portfolio growth has been +19.0 per cent a year on a 5-year rolling basis, against roughly 4.3 per cent nationally on CoreLogic/Cotality figures. Past performance is not a guarantee of future results.

The point of quoting that here is the spread behind the median. Those portfolios were bought in every kind of month, including months when investors were pouring in and months when they were running for the exits. The spread of outcomes owes far more to which asset was chosen and which street it sat in than to which quarter the client entered.

Two streets in the same suburb can be having completely different outcomes right now. One is holding its days on market and its tenant demand while buyers thin out. The other was only ever propped up by the investor crowd that has just left. A suburb median tells you nothing about which is which. Street-level data does.

That is the Ripehouse reframe on this week's number. A 44 per cent fall in investor lodgements is an input. It describes what other people are doing. Your outcome will be decided by the asset, the street and the structure you buy it in, which is the part you control.

Want to see how we test a purchase like this street by street, with fewer buyers in the room? Join Jacob's free live webinar, "If I Were Buying an Investment Property in Australia Today".