Housing lending growth slows as investor appetite wanes: CBA's Gareth Aird
GUEST OBSERVER
September’s 1.6% fall in total housing-related lending was driven by a big fall in lending to investors partially offset by an increase in lending to owner-occupiers (O-Os).
The ABS housing finance publication contains a glut of information on lending for housing-related purposes. We trawl through the key figures below:
O-Os: There has been solid growth in lending to O-Os over the past year and this continued in September. By value lending is up a sizeable 23.1% through the year and by number it’s up 8.4%. A material increase in the average loan size largely explains the difference between lending by value and by number. In September the average new loan size for an O-O was a record $379k – up 18.0% through the year. In NSW the average new loan size for an O-O was 449k while it was $379k in Victoria. Record low mortgage rates have helped contribute to a lift in average loan size because the capacity to borrow rises when borrowing costs fall.
Investors: In the last few months lending to investors has cooled quite sharply following exceptional growth for much of the past two years. There is now plenty of evidence that indicates measures introduced by a number of banks to slow investor-related lending are having an impact. In addition, a slow decline in rental yields due to strong dwelling price appreciation is acting as a natural restraint on lending growth to investors. We expect this trend to continue over coming months in line with cooling auction clearance rates.
Construction: Total lending for dwelling-related construction was flat in September and has eased off in recent months. This is consistent with the recent tapering off in building approvals growth. The lag between finance/approvals and construction means that residential construction will remain buoyant deep into 2016. Dwelling construction generates jobs and the multiplier effect benefits other sectors of the economy. A further positive for construction was that lending for alts and adds rose by a solid 6.4% and sits 14.9% higher on year ago levels.
States: The data on O-Os by State in September shows that annual growth in the number of loans is strongest in NSW (+20.4%), followed by Victoria (+10.1%) and
SA (+8.7%). It is negative in QLD (-0.4%), WA (-6.2%), and Tasmania (-11.0%).
An update on lending to investors by State will be in Friday’s Lending Finance publication.
First home buyers: The number of loans to first home buyers rose by 6.2% in September. First home buyers represent just 15.4% of all dwellings financed – close to record lows.
All up, today’s data print is consistent with other indicators of the housing market which show that activity is moderating. Policymakers are likely to welcome the latest slowdown in housing credit growth particularly given business credit growth has picked up. The different parts of the credit space are evolving in the directions that policymaker’s desire.
Gareth Aird is economist at Commonwealth Bank and can be contacted here.