Owner-occupiers are flocking back into the property market as tighter lending standards put the brakes on investors.
The value of loans approved for owner-occupied housing jumped 6.1 per cent in August, while approvals for housing investment slumped 0.4 per cent, the third fall in the past four months.
The latest moves are the result of a "perfect storm" of historic low interest rates combined with efforts by banks and regulators to curb investor activity, TD Securities head of Asia-Pacific research Annette Beacher said.
Many lenders have hiked interest rates for investors and made it harder for them to get loans, while cutting rates for owner-occupiers.
The moves are a response to the Australian Prudential Regulation Authority's introduction of a 10 per cent `speed limit' for investor property loan growth.
Ms Beacher said the value of owner-occupier loans has jumped 26 per cent year-on-year, whereas investment lending growth has slowed to 12 per cent.
"There's been a complete reversal now - at one stage we had investor financing outpacing owner-occupiers two-to-one," she said.
With a much more encouraging mix, there's no need for the Reserve Bank to cut the cash rate, Ms Beacher said.
"It tells us that low interest rates are working but APRA's macro tools are also biting down on the investor market."
JP Morgan economist Tom Kennedy said the share of new loans going to investors is currently at its lowest level in more than a year and a half, at 39.5 per cent.
"We expect the share of loans to investors to slide further into year end, with certain banks still required to pull back on investor lending to comply with APRA regulations," he said.
But UBS economists said the sag in investor loans could be a reflection of a re-classification of some loans from `investor' to `owner-occupier' by some banks.
That could be distorting the data and meaning it does not reflect the true underlying trends.
The data also showed the size of the average home loan is at a record high, CommSec economist Savanth Sebastian said.
Over the past year the average home loan grew by 15.4 per cent to $371,200, and is showing no signs of slowing down, he said.
"(It's also) growing at the fastest pace in 12 years ... clearly the lift is been fuelled by the low interest rate environment," he said.
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