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A surge in the value of housing loans to investors has fuelled fears of a price bubble in major capital cities even as observers warn that red-hot apartment markets will be challenged in coming years by massive volumes of new supply.

On a seasonally adjusted basis, the latest ABS data shows that the value of loans made to investors by Australian financial institutions jumped by 4.9 percent in November to come in at $13.269 billion.

Investor housing lending activity has now risen during six out of the past seven months and is up a whopping 22.4 percent since April.

Lending to owner occupiers (up 0.4 percent in November) also remains at elevated levels, although activity in this segment has eased back from peak levels in 2015.

Having previously shown signs of easing back, investor lending for construction of new homes jumped by almost 43 percent in November and is now at its second highest level on record.

Investor lending for purposes of rent or resale by individuals, meanwhile, has risen for seven months straight and is up almost 30 percent since April.

The latest data adds fuel to concerns about a price bubble especially in major city markets as record levels of new dwelling construction leads to a massive volume of new stock which is expected to come online over coming years.

In inner Melbourne (CBD and immediate surrounds) and inner Brisbane alone, for example, almost 17,000 and more than 9,500 new multi-residential dwellings were approved for construction over the two years to October respectively.

In his recent No Go Zones report, renowned industry commentator Terry Ryder warned of risks in a number of markets.

These include Melbourne and Brisbane as well the Gold Coast and parts of Sydney such as Parramatta.

In a prediction made in the middle of last year, meanwhile, BIS Shrapnel said it expected apartment price falls of eight, six and five percent in Melbourne, Brisbane and Sydney respectively over the next three years.

The latest data has also sparked a political row over the issue of ordinary Australians being squeezed out of the market by investors.

Labour Treasury Spokesman Chris Bowen said that ‘the most generous tax concessions in the world’ were sending house prices soaring beyond the reach of owner occupiers.

Government Acting Treasurer Kelly O’Dwyer, however, hit back, pointing out that the level of investor credit being granted was below its peak prior to macroprudential measures being adopted by the Australian Prudential Regulatory Authority in late 2014.

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