Demand for housing among owner occupiers is on the increase according to non-major lender ME Bank.

The lender’s latest Property Buying Intentions Report predicts the coming year will see Australian housing stay in high demand, with an increase in the owner occupier market to offset any decrease in the appetite of property investors.

The report shows in the six months to December 2015 the proportion of Australians looking to buy property fell by 1% to 17%, but owner occupiers now hold a larger share of that figure.

According to ME, of those looking to buy in 2016, 50% are now owner occupiers, representing a 5% increase over the last half of the year.

Only 33% of those looking to buy in 2016 are property investors, with demand from that sector falling 5% over the six month period.

ME Bank treasure John Caelli said current low interest rates and improved economic conditions were behind the strength in demand from owner occupiers.

“While recent tightening in bank prudential regulations and lending criteria have reduced the proportion of investor buyers, overall demand for property may remain strong due to increased demand by owner occupier buyers,” Caelli said.

“Demand expectations from buyers may also remain strong due to unmet demand from owner occupiers supported by continued low borrowing costs and recent improvements in the labour market,” he said.

Demand for property is particularly strong in younger people, with the report showing 23% of Generation Y are saving to buy a property to live in and 25% intend to buy a property to live in in the next 12 months, the most of any age group.

Ten per cent of Generation X are saving to buy an investment property and 8% intend to buy an investment property in the next 12 months, the most of any age group.