Investment Lending

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<p><span>The ABS released its l</span>ending finance<span> 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.</span><br><br><span>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.</span></p>
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<div>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.<br><br><strong><span style="text-decoration: underline;">Shifting composition</span></strong>
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<div>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.<br><br>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.</div>
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<div>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.<br><br>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.<br><br>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.</div>
<br><div><strong><span style="text-decoration: underline;">Property investor loans clamp-down</span></strong></div>
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<div>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.<br><br>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.<br><br>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).</div>
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<span>Despite the softening in investment loans, with the volume of NSW owner-occupier lending booming by </span>an astonishing 46.2%<span> 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.</span>
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<div>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.<br><br>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.<br><br>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.</div>
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<div>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.</div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Shifting sands (record NSW lending?) Pete Wargent

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<p>Allens has advised ASX-listed Mirvac Group (Mirvac) on its fully underwritten institutional placement to raise A$750 million.</p>
<p>They also offered counsel on a non-underwritten security purchase plan to raise up to A$75 million. </p>
<p>Combined they make up one of the largest equity raisings in Australia this year.</p>
<p>The Mirvac equity raising follows a series of equity raisings by real estate groups.</p>
<p>"We're seeing several real estate groups move to capitalise on strong equity market conditions to embark on acquisitions or raise funds for future opportunities," said Partner Julian Donnan, who led the Allens team alongside Partner Kate Towey.</p>
<p>"Mirvac is one of Allens' long-standing clients and we were pleased to advise them on this landmark capital raising that will strategically position it for future growth," Kate said.</p>
<p>Approximately A$2.1 billion of capital has been raised by Australian Retail Estate Investment Trusts in 2019. Allens has acted on a number of these transactions, including:</p>
<p>- Acting for the underwriters on Dexus' A$900 million fully underwritten institutional placement;<br>- Acting for Charter Hall Education Trust on its A$120 million fully underwritten institutional placement and follow on unit purchase plan; and<br>- Acting for the underwriters on VIVA Energy REIT's A$100 million fully underwritten institutional placement.</p>
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Allens advises Mirvac on $750m equity raising

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<p>Lending to owner occupiers to build or buy a new home increased by 4.3 percent in March 2017 after month on month declines in January and February, according to the Australian Bureau of Statistics.</p>
<p>Loans to buy a new dwelling were up by 1.9 percent on the previous month.</p>
<p>Lending during the full March 2017 quarter was down by 0.4 percent on the level a year earlier.</p>
<p>Geordan Murray, economist, HIA, said after the housing finance figures showed a relatively soft start to the year, a jump in March saw the number of loans to owner-occupiers building or buying new homes increase by 4.3 percent.</p>
<p>“The increase in new home lending during the month was primarily driven by an increase in the number of loans to those purchasing new homes, which were up by 9.5 percent in the month," he said.</p>
<p>"Furthermore, during the full March 2017 quarter lending activity in this part of the market was 8.1 percent higher than a year earlier.</p>
<p>"The number of loans to owner-occupiers constructing or purchasing new homes during the March 2017 quarter was stronger than a year earlier in five of the eight states and territories.</p>
<p>The largest increase was recorded in Queensland (+10.9 percent), followed by Tasmania (+10.1 percent), Victoria (+9.2 percent), South Australia (+6.5 percent), and New South Wales (+3.8 percent).</p>
<p>The largest fall was recorded in the Northern Territory (-35.5 percent), followed by Western Australia (-7.6 percent) and the ACT (-2.4 percent).</p>
<p>"A growing number of apartment projects that have been under construction over the last couple of years are now reaching completion.</p>
<p>"This means that buyers who purchased off the plan are now reaching the settlement stage.</p>
<p>"We expect to see lending in this part of the market continue to rise over the year ahead as more apartment projects reach completion."</p>
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Lending to owner occupiers to build or buy up in March

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<p>GUEST OBSERVER</p>
<p>The January housing finance approvals came in above expectations with a notably strong rise in the value of investor lending. </p>
<p>The total number of loans to owner occupiers posted a modest 0.5 percent rise, better than the forecast 1 percent dip but within the range of monthly volatility which is wider for January due to the seasonal low.</p>
<p> Ex refi, ‘new loans’ were softer, down 1.7 percent. Both are up a touch on year ago levels.</p>
<p>Of more note was another strong rise in the value of investor loans, up 4.2 percent/mth to be 27.5 percent higher over the year.</p>
<p>The resurgence since around mid 2016 follows a sharp drop-off over the second half of 2015. The monthly value of investor approvals is now 5.3 percent below its peak in the first half of 2015 and on the basis of January’s update is showing no signs of topping out.</p>
<p><span>Details</span> <br>Owner–occupiers (no.)   0.5%mth, 1.9%yr<br><span>– ex-financing (no.)        –1.7%mth, 4.6%yr</span><span>       </span></p>
<p>Construction of dwellings (no.)               –1.4%mth, –5.1%yr<br><span>Purchase of newly built dwellings (no.)   –0.3%mth, 10.4%yr</span><span>        </span></p>
<p>Value of loans: <br><span>Owner-occupiers ($bn)   –0.2%mth, 1.9%yr<br></span><span>Investors ($bn)              4.2%mth, 27.5%yr<br></span><span>Total ($bn)                    1.5%mth, 11%yr<br></span><span>Total ex refi ($bn)          1.3%mth, 15.6%yr      </span></p>
<p><span><em><span>Matthew Hassan</span> is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</em></span></p>
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