Property buyers flood back to market
AUGUST JUMP IN INVESTOR LENDING
Lenders approved a record $33.9 billion in new housing loans in August, with first-home buyers flooding back to the market, helped by NSW and Victorian government incentives.
Investor lending rose 4.8 per cent in the past two months, and is starting to reverse the previous five months of steep falls, which followed a cooling in the Sydney market and new lending restrictions imposed by the Australian Prudential Regulation Authority and the Reserve Bank.
Research director for property data group CoreLogic, Cameron Kusher, said it was too soon to say whether the investment market was developing a new momentum. However, he said, property remained attractive.
“Investor credit growth has picked up in each of the last two months supported by low interest rates, while demand is also being driven by new incentives for firsthome buyers,” he said.
Although banks raised rates for the interest-only loans favoured by investors following concerns of regulators, Mr Kusher noted that some banks had lowered mortgage rates for property investors in recent weeks.
He said there were many signs of the Sydney housing market cooling, with more stock coming on to the market and values declining. But the same was not true of Melbourne, Hobart, nor many regional markets. Corelogic recorded a 0.29 per cent fall in Sydney house values in September.
Population growth, with Sydney and Melbourne increasing by about 100,000 people a year, ensured there would be continuing pressure on housing markets in both cities, Mr Kusher said.
Total investor lending in August was just 6.5 per cent higher than a year ago, contrasting with the 26 per cent growth rate at the start of the year, which sparked regulator concern.
Reserve Bank governor Philip Lowe said in August that he believed the regulators had “done enough” to lower risks in the housing market.
It would be possible for further “macro-prudential” or regulatory measures to be imposed if investor demand continued to build, but Commonwealth Bank senior economist Michael Workman said he believed the latest regulatory measures, which took effect in April, would be effective.
“We expect a gradual easing in lending growth rates under the weight of new APRA guidelines and higher mortgage rates for investors and those with interestonly loans,” he said.
The ABS housing finance report shows first-home buyers accounted for 17.2 per cent of new dwellings financed in August, the highest share since 2013, under the effect of new stamp duty exemptions in NSW and Victoria.
Mr Workman noted that this was still below the 20 per cent average share for the past two decades, but it was a long way ahead of the low point of less than 13 per cent reached last year.
ANZ senior economist Daniel Gradwell said finance for the construction or purchase of new dwellings was rising, with particularly good growth in NSW, Victoria and Queensland. But the Housing Industry Association said an Australian Bureau of Statistics report on building activity released on Wednesday showed the number of housing starts was falling, and said the lift in finance approvals reflected people now settling the purchase of properties built over the previous year.