Housing investors' loan approvals still down

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The most recent data from Australian Bureau of Statistics (ABS) showed that the country’s home loan approvals in June were down for both owner occupiers and housing investors.

Business Insider Australia reported that the value of housing finance dropped by 1.6% to $31.2 billion over the month in seasonally adjusted terms.

Finance value for owner occupiers also fell. After a .7% hike in May, the sector sank by 1% in seasonally adjusted terms to $20.85 billion.

Similarly, loan approvals for investor finance dipped by another 2.7% in June, down to $10.382 billion.

The results may be indicative of the weakening Australian credit growth, and the rebound recorded in May may have been just a short breather from stricter lending restrictions of banks.

This was the angle held by JP Morgan analyst Henry St John, who said that “housing finance looks particularly weak in annual terms, despite a short-lived reprieve for the sequential run rates in May, and is currently declining at 5%.”

Highlighted in the report was the sharp decline in loan approvals to investors in 2018, and this appears to be accelerating. In fact, while owner-occupier loans also decreased in June, the latest figures show that is performing better than investor demand.

Annually, a downward trend in owner-occupied lending was seen in this category across NSW, Victoria, Queensland, SA and WA.

“Some strength in owner-occupier lending was a necessary condition to prevent credit growth from slowing dramatically,” St John said.

As a result of tighter lending standards and the consequences of the inquiries at the Royal Commission, St John also pointed out that investor housing finance is still “in the doldrums.”

“From the demand side, continued depreciation in property prices continues to erode the expected rate of return on new property investments, reinforcing the feedback loop between new lending and property prices in Sydney and Melbourne,” he said.

Considering the escalating cost of finance, a slowdown in investor lending is expected for the rest of this year.

 

Related stories:
The Eight Month Home Loan Downturn
Property Market: A Slowly Deflating Bubble

 

 

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