The proportion of investors in the housing market has hit its lowest level since 2002, as owner-occupiers continue to drive a rapid rebound in property prices.

Despite the defeat of Labor’s proposed changes to negative gearing at the federal election, the value of new home loans to investors now sits at just 28 per cent of the national mortgage market, well below the long-run average of 38 per cent.

While the factors driving the trend are open to interpretation, it’s clear that first-home buyers are the key beneficiaries.

Investors normally buy properties at the more affordable end of the market, so their retreat makes it easier for aspiring home owners to get a foot on the property ladder.

That said, lending to investors is still growing.

It’s just that lending to owner-occupiers is growing much faster.

The latest ABS figures reveal the value of new investor home loans rose 1.4 per cent in October, after declining 3.9 per cent in September, while the value of new owner-occupier loans rose 2.2 per cent.

The value of new owner-occupier loans is now up 18.3 per cent on its May 2019 trough – more than double the increase seen in investor home loans over that same period (7.9 per cent).

CoreLogic’s head of research Tim Lawless said the data shows owner-occupiers are driving the house price recovery.

But he told The New Daily more and more investors would jump back into the market next year, as strong capital growth prospects and widening rental margins begin to turn heads.

“With mortgage rates likely to drift lower next year, the spread between rental yield and mortgage rates has inverted,” Mr Lawless said.

“And we’re likely to see more and more opportunities – not just for capital gains, but also for cash-flow-positive properties – based on the fact that, even though yields are compressing, we are expecting that spread between fixed mortgage rates and gross yields to widen.”

So while investors’ share of new homes is at an all-time low, it’s expected to rise in 2020.

This will push some first-home buyers out of the market, but it’s far from the only factor making life difficult for Australia’s aspiring home owners.

The market is rapidly winding back recent improvements in affordability, with national properties growing at their fastest rate in more than a decade.

And soaring prices mean aspiring home owners who sign up to the government’s First Home Loan Deposit Scheme will have fewer properties to choose from.

The government scheme has price caps of $700,000 in Sydney and $600,000 in Melbourne, but the median property price in each city is $840,072 and $666,883 respectively.

“The recovery is normally not as fast as it has been this time around,” AMP Capital senior economist Diana Mousina told The New Daily.

“But we did have a few things happening at one – the election, the change in lending standards from APRA, and the rate cuts all happening in May and June this year.”

The ABS figures show a gloomy outlook for the broader construction industry, though, with construction lending falling 10.1 per cent in October.

The sharp fall points to a continued slowdown in a sector that has already shed thousands of full-time jobs.