Property investment loans already bottoming out: Pete Wargent

APRA's crackdown has skimmed skimmed the high LVR property investors out of the market, but there still exists a relatively high level of demand for investor credit from those with the requisite serviceability that remain. 

 

The ABS Lending Finance data series for February 2016 showed total lending finance across all measured sectors rebounding nicely in February, but against an underlying downtrend.

 

That's in part due to the APRA effect, which has effectively stymied the outlandish surge in property investment demand. 

Breaking out the data into its component parts and using the smoother trend figures we can see that despite a solid rebound in February commercial lending has apparently lost some of its momentum, which is potentially underwhelming news for business.

Of course, from month to month the underlying business lending figures are lumpy, and there's no getting away from that. 

But for the moment, at least, the trend appears to be softening.

 

The figures for personal finance at first blush appear to be almost comically soft, declining to levels last seen in 2007. 

However, I do wonder about classification issues here, given the massive and increasing popularity of mortgage buffers, offset accounts, and redraw facilities. Not really sure about this, but it looks muchos weird to me. Let's pass on that one, Magnus! 

At the state level, commercial finance in rolling annual terms has been trending up marginally in Queensland, but down in Western Australia. However, the latest figures suggest that WA may have at least arrested its decline.

Splitting out the commercial finance data by industry it is with no great surprise that we discover with that lending in the mining sector has been obliterated by about a third over the past year to be around 40 per cent below its peak.

 

Fortunately mining is only one part of Australian industry, and other sectors have fared considerably better, with business lending rates tracking at record lows.

Macroprudential tools have been deployed in order to cap property investor credit growth at 10 per cent, while the RBA disclosed some of its thought processes in this regard this week - interesting insights indeed (imagine having your emails disclosed like that in the public domain, by the way!).

 

These moves have had the desired effect, and the focus has very much shifted towards owner-occupier lending. 

 

That said the seasonally adjusted February Housing Finance data showed investment loans rebounding by +4.1 per cent in February to $11.9 billion, so there is still a reasonably high volume of investor activity in the post. 

 

Indeed, investor loans are steadying across most states in February when looked at in rolling annual terms. 

That said, activity in Western Australia was down by 20 per cent in February from the prior year comparative result, so there is possibly still some decline to come there, although a few analysts have already called the market bottom for Perth. 

Investor activity in the Northern Territory has fallen to such a low level at about $46 million per month that it wouldn't even register as a blip on the above chart. The February result was down by 43 percent from one year ago, so the trend line is shaping as if participating in a race to the bottom.

 

A decent rebound for Lending Finance in February, but there looks to be a softening tending in business finance. 

 

Monthly investor lending activity looks to be steadying in New South Wales ($4 billion), Victoria ($2.6 billion), and Queensland ($1.5 billion), though there is still some potential softness in evidence elsewhere.

With some banks having offered fixed rate home loans as low as 3.99 per cent, anecdotally there was a strong month of owner-occupier lending in March.