Australian mortgage lending confirms soft housing market outlook: ANZ Research

Australian mortgage lending confirms soft housing market outlook: ANZ Research
Australian mortgage lending confirms soft housing market outlook: ANZ Research
GUEST OBSERVER
 
Housing finance commitments fell in September, driven by a sharp drop in investor lending.
 
While today’s report also showed an increase in upgrader lending, the impact of the changes to investor lending standards in recent months is clearly net negative for housing market sales activity and housing construction. Slower auction market sales, weaker house price growth and higher mortgage rates in recent weeks point to a soft housing market outlook in 2016.

Investor finance fell a sharp 8.5% m/m in September, and has now fallen for five consecutive months (Figure 1). APRA will be satisfied that their measures are indeed having the desired effect of slowing annual investor credit growth down towards sub-10%. However, the sharp loss in housing market momentum in recent months presents a soft outlook, not just for house price growth and mortgage lending, but also for the contribution to economic growth from housing.
 
Slower price growth and higher mortgage rates in recent weeks are expected to weigh on planned housing construction (Figure 1) and provide less of a boost to consumer confidence and retail spending.

In contrast to weaker investor finance, owner-occupier mortgage lending increased 1.7% m/m (excluding refinance) in September. While growth in owner-occupier lending has offset weaker investor finance in recent months, today’s net negative impact is likely to continue in the coming months as the combined impact of slower house price growth, the recent increases in mortgage lending rates and weak household income growth provide a headwind to owner-occupier sales. 
 
Australian mortgage lending confirms soft housing market outlook: ANZ Research
 
Australian mortgage lending confirms soft housing market outlook: ANZ Research
 
Australian mortgage lending confirms soft housing market outlook: ANZ Research
 

David Cannington is senior economist, ANZ Research and can be contacted here.

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