First home buyers are back, but so are investors
Investor home loans showed a monthly rise of 1.6 percent in June, while the proportion of first home buyers in terms of finance commitments also increased to 15 percent, latest data by the Australian Bureau of Statistics shows.
While the return of first home buyers is good news, APRA’s intervention to cool the heated property market isn’t biting as much going by the investor lending numbers, despite the March and June rate hikes by most banks.
ABS data
According to ANZ research, highlights from the ABS data were:
- The value of housing finance commitments (excluding owner occupier refinancing) rose 1.5% m/m in May, slowing annual growth to 7.1% y/y from 9% the previous month.
- Investor finance segment bounced in June, with the value of investor housing up 1.6% m/m in June after falling in three of the four months prior. As a consequence of these previous declines the annual pace of growth in investor finance slowed to 5.7% in June from 8% y/y in May and down from double digit y/y growth in April.
- The value of owner-occupier approvals (excluding refinancing) recorded the fifth consecutive monthly rise, up 1.4% m/m in June. Owner-occupier approvals (excluding refinancing) are 8.3% higher over 12 months, a slowdown from the 9.8% y/y growth recorded in May but still the second fastest annual growth since May 2016.
- First home buyers came to the fore in June, rising 9.5% m/m to achieve annual growth of 8.5% - the highest since February 2014. Interestingly, this growth comes ahead of the new FHB schemes in NSW and VIC from 1 July.
It said the most “notable feature of the June housing finance data was the bounce in investor financing, up 1.6% m/m in value terms”.
This was the biggest increase in investor financing since January and followed a period of reasonably steep monthly falls since then, it said.
“However, so it’s too early to conclude it is the start of a material recovery in investor lending,” ANZ noted.
The annual growth of investor financing slowed to 5.7% — its weakest pace since August 2016.
The shape rise in investor financing would be a disturbing development for the regulator and Reserve Bank of Australia, it said.
This was echoed by RateCity.com.au money editor Sally Tindall, who said the results show investors were still in the game.
“The APRA intervention initially took the steam out of the property market, but the latest figures confirm buyers are choosing to wear the rate hikes,” she said.
“APRA has been focused on deterring investor growth over two years now with limited success. If they’re serious about reducing the dominance of investors, APRA may have to introduce a bigger stick to fend them off.
Meanwhile, owner-occupied financing commitments (excluding owner occupier refinancing) rose a solid 1.4% m/m to be up 8.3% y/y. The ongoing growth in the value of housing finance for construction and new dwellings suggests there could be a recovery in building approvals coming after a period of weakness, added ANZ.
However, industry body Real Estate Institute of Australia (REIA) had a different take, stressing the return of first home buyers to the market.
“The proportion of first home buyers, as part of the total owner-occupied housing finance commitments, increased to 15 per cent and is the highest since February 2014,” REIA president Malcolm Gunning said.
“Overall the figures for June 2017 show, in trend terms that the number of owner-occupied finance commitments decreased by 0.2 per cent. If refinancing is excluded, in trend terms, the number of owner-occupied finance commitments increased by 0.3 per cent and is the tenth consecutive month of increases.”
In terms of trends, decreases were recorded in New South Wales, South Australia, Western Australia, Tasmania and the Northern Territory with South Australia having the largest decrease of 1.2 per cent. Increases were recorded in Queensland, Victoria and the Australian Capital Territory which had the largest increase of 1.0 per cent.
“In trend terms, the number of established dwellings purchase commitments decreased by 0.5 per cent while new dwelling construction increased by 1.9 per cent and the purchase of new dwellings increased by 1.3 per cent.
“The June figures show that the market is adjusting with owner occupiers and first home buyers returning to the market as investor activity decreases in response to the actions of the regulators and banks to limit bank lending to dampen investor demand for property,” Gunning said.
On the loan composition, RateCity’s Tindall said the percentage of fixed rate loans increased from 11.2 per cent last September to 17.5 per cent in June, the highest percentage of fixers since November 2013.
“This is a clear reaction to the out of cycle rate hikes from the banks as borrowers move to protect themselves from future increases,” she said.
“RateCity data shows that fixed rates bottomed out in November of last year, when 12.5 per cent of people fixed however it’s taken borrowers over half a year to realise the bottom of the market has passed.
“With the spring real estate market just around the corner and auction rates continuing to make modest improvements, it will be interesting to see whether it will be game on again for the spring property market,” she concluded.