Investor loans in midst of recovery: Westpac's Justin Smirk

GEUST OBSERVER

 

The Nov housing finance figures staged a modest lift for owner occupiers but it does looks as if investor loans are in the midst of a more constructive recovery.

The total number of owner occupier approvals lifted 0.9 percentmth to be down 2.6 percent/yr, slighted better than market expectations for a flat result but less than Westpac's forecast of a 2 percent gain. Ex-refinance though, approvals were up a more solid 2.1 percent after a 1.2 percent gain in Oct.

 

The value of housing finance approvals to investors surged 4.9% in Nov adding to the 1.5% gain in Oct. We are now in the midst of a recovery in investor finance that is more consistent with the solid recovery in the Sydney and Melbourne housing markets through Oct-Nov-Dec.

 

The total value of housing finance approvals to both owner occupiers and investors lifted 2.2 percent/mth but was up an even more solid 3.2 percent/mth /7.4 per yr ex-refinancing.

 

The state detail ex-refinance had NSW printing a solid gain, Vic added modestly to the solid Oct gains while WA surprised with a very solid bounce almost unwinding a two month contraction. Qld continues to print robust through the year growth rates. Note that the state detail on investor finance approvals is released next week.

Construction-related owner occupier finance approvals also had a solid month – construction approvals lifted 2.3 percent/mth and finance for the purchase of newly built dwellings also retraced the Oct losses with a material 3.3 percent mth lift.

 

Note that the latter includes purchases of 'off the plan' apartments, it is a poor proxy for settlements in the sector as it includes finance for purchase of other types of newly built dwellings and only covers owner occupiers and purchases by Australian residents – there are no corresponding measure for investors and all finance data is for loans to resident Australians only.

 

The complete absence of timely data on foreign buyer activity and the painfully limited data around domestic housing investor activity can be very frustrating. The finance approvals data for example relies almost entirely on data collected by APRA that continues to follow a framework that has not been materially revisited in the last 25 years. 

Overall the Nov finance approvals are highlighting something of a recovery with most components tending to be positive even more so for investors. This is now more in line with the recent strength in auction markets and, to a lesser extent, prices as the pickup in conditions is now showing through in the finance figures and should continue to do so in the months ahead.