The Housing Industry Association (HIA) said that the market will continue to weaken after the value of lending to investors, as well as lending to owner- occupiers, has significantly dropped

Over the past year, the value of lending to investors and owner- occupiers decreased by just over 20% and 7.7%, respectively.

To further prove worsening conditions, HIA cited The Australian Bureau of Statistics (ABS) housing finance figures for the month of August 2018. Unsurprisingly, they coincided with the association’s observations.

The data revealed that the value of lending to investors sank by 1.1 % in the month and is 20.5% below the level recorded in 2017. The number of loans to owner-occupiers building or purchasing a new home, meanwhile, declined by 4.2% in the month and is 13.8% lower year-over-year. Finally, the number of loans to owner-occupiers purchasing established homes (excluding refinancing) was down by 2.5% in the month and was 13.9% lower than the level a year ago.

 “Investor lending has now dropped to the lowest monthly level since mid-2013 which was the very beginning of the current housing cycle,” said HIA Acting Principal Economist Geordan Murray. 

It is also evident that the growth in lending to owner-occupiers, including first home buyers, is also declining. This is worth noting because the sector used to counterbalance the market repercussions of having fewer investors.

Murray pointed out that different rulings from Australian Prudential Regulation Authority (APRA) pushed the market to slowdown.

“Variations in investor lending have had a significant impact on home prices throughout the cycle. The timing of APRA’s interventions in the home lending market were decisive turning points for investor lending activity and these turning points coincided with the turning points in home prices. “

“At the time when APRA announced these measures both investor credit and home prices were growing rapidly and the interventions were effective in slowing both.”

“The concern is that APRA’s interventions, which were effective in taking the heat out of the market at the high point of the housing cycle, now represent a risk as the market retreats,” Murray noted.