Despite increased chatter about a potential slowdown in Australia’s property market, that sentiment is yet to be meaningfully felt in home loan lending data.
According to the RBA’s latest financial aggregates report, private sector credit for housing rose by a further 0.5% in January, leaving the annual increase at 7.3%. While below the peak of 7.5% seen in August and September last year, annual growth in housing credit is still running well above the 5.5% average seen in the four years to 2014.
Continuing the pattern seen in recent months, strength in lending to owner-occupiers largely offset continued weakness in that to housing investors.
The amount of credit extended to owner-occupiers rose by a further 0.6%, leaving the annual increase at 6.9%, the fastest annual acceleration seen since October 2010.
While lending to owner-occupiers continued to accelerate, that to housing investors continued to decelerate, fitting with measures implemented by Australia’s banking regulator, APRA, to cool credit growth to this segment.
New investor borrowing increased by 0.3% over the month, the equal lowest level seen since May 2009. From a year earlier, credit growth to investors slowed to 7.9%, below APRA’s targeted annual limit of 10% and the lowest level seen since February 2014.
Despite the sharp deceleration in new lending to housing investors, that has been almost entirely offset by an acceleration in owner-occupier lending.
The chart below, supplied by Tapas Strickland of the NAB, tells the story.
Outside of housing there was both good and bad news to come from the RBA report, with business lending continuing to increase, offsetting weakness in personal lending.
Businesses lending rose by 0.6%, up on the 0.5% increase seen in December, with the figure the sharpest increase seen since October 2014. Despite the monthly acceleration, the annual pace of growth slowed to 6.2% from 6.4% seen prior.
Although new lending for housing and business continued to increase, that was not replicated in personal lending.
It slid by 0.2%, the same level as the annual figure. It was the third month in four that personal lending contracted, with the annual decline the largest seen since May 2013.
Not a great lead indicator for household consumption, it has to be said, particularly given the likelihood of a slowdown in labour market hiring in the months ahead.
Should weakness in the residential housing market also materialise, something that is not suggested in the housing lending figures reported for January, this will add to downside risks for household spending in 2016, and will increase the likelihood that further rate cuts from the RBA may need to be delivered.