Shifting sands (record NSW lending?) Pete Wargent
Pete WargentDecember 17, 2020
The ABS released its lending finance figures for the month of September 2015 which showed a seasonally adjusted 9.5% jump in commercial finance, though in trend terms commercial finance has looked somewhat peaky.
Total lending finance increased from a seasonally adjusted $70.7 billion in August to a new cyclical high of $75.3 billion, another signal that low interest rates are gradually biting and having a positive impact on credit flows.
Although there have been instances of stronger monthly results for lending finance - a flood of recapitalisation through the financial crisis saw spikes in June 2007 and January 2008 respectively - the monthly trend result has now hit a fresh high of above $73 billion.
Shifting composition
Shifting composition
With APRA having clamped down on property investment loans, lenders are evidently pushing owner-occupier products harder, with the red line in the chart below denoting another 3% increase in the month to beyond $21 billion.
In trend terms owner-occupier lending has surged more than 20% higher over the past year, while major renovations activity ("alterations and additions") trended up to its best result in four years.
In trend terms owner-occupier lending has surged more than 20% higher over the past year, while major renovations activity ("alterations and additions") trended up to its best result in four years.
The great surge in owner-occupier loans over the past year has been almost entirely accounted for by New South Wales and to a somewhat lesser extent Victoria.
Mirroring figures previously reported by the Reserve Bank, September was a healthy result for commercial finance with a 9.5 per seasonally adjusted jump in the month to $46.1 billion.
While the trend result looks peaky, this can be a rather unpredictable series, and in rolling annual terms commercial lending has surged 50 per cent higher over the past half decade to sit at its highest level in some 7.5 years.
Mirroring figures previously reported by the Reserve Bank, September was a healthy result for commercial finance with a 9.5 per seasonally adjusted jump in the month to $46.1 billion.
While the trend result looks peaky, this can be a rather unpredictable series, and in rolling annual terms commercial lending has surged 50 per cent higher over the past half decade to sit at its highest level in some 7.5 years.
Property investor loans clamp-down
Loans to purchase investment property are now clearly softening, which overall is a healthy sign for residential real estate markets which had become far too top-heavy with investors, resulting in rising vacancy rates and declining rents in some regions.
On a rolling annual basis NSW investment loans tore out a new record of $67.9 billion, but this particular peak is now close to being in following three months of softer results.
In June the Premier State had seen an unprecedented $6.6 billion of investor loans written in a single month, but over the last two months of available data the total dollar value of NSW property investment loans has come in at around $5.6 billion (which is nevertheless still a huge volume in historical terms).
On a rolling annual basis NSW investment loans tore out a new record of $67.9 billion, but this particular peak is now close to being in following three months of softer results.
In June the Premier State had seen an unprecedented $6.6 billion of investor loans written in a single month, but over the last two months of available data the total dollar value of NSW property investment loans has come in at around $5.6 billion (which is nevertheless still a huge volume in historical terms).
Despite the softening in investment loans, with the volume of NSW owner-occupier lending booming by an astonishing 46.2% over the past year, September was the greatest month on record for total NSW property lending at well over $14 billion at the state level.
Now it may be that some of the outlandish $8.55 billion of NSW owner-occupier lending in September was bogus - or at least not genuinely representative of new property market demand - with some existing owners having opted to refinance following the tightening of mortgage rates by some lenders.
At the sub-regional level it would be no surprise on this evidence to see surprisingly strong auction and property market results in some of Sydney's inner ring, particularly in the eastern suburbs.
However it's clear that the heat has already come right out of the western and outer south-western suburbs, leaving some recent buyers wondering what they've let themselves in for.
At the sub-regional level it would be no surprise on this evidence to see surprisingly strong auction and property market results in some of Sydney's inner ring, particularly in the eastern suburbs.
However it's clear that the heat has already come right out of the western and outer south-western suburbs, leaving some recent buyers wondering what they've let themselves in for.
Generally speaking APRA's macroprudential measures have been effective in slowing the pace of investor lending right across the board. Next up, I'll take a look at the trends in investor lending across each state and territory.
PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.
His latest book is Four Green Houses and a Red Hotel.
Pete Wargent
Pete Wargent is the co-founder of BuyersBuyers.com.au, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.