The collapse in Australian investment property lending, in 6 charts

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Earlier today the ABS revealed that lending to Australian housing investors fell off a cliff in October, indicating that recent macro-prudential measures introduced by APRA are working to stymie lending to this component, and as a consequence heat in the housing market.

The decline in investor lending has been dramatic, following a period of significant growth that saw investors briefly replace owner occupiers as the largest source of new housing finance earlier in the year.

Curbs on lending to new investors and higher variable mortgage rates, along with the likely reclassification of loans as those to owner occupiers rather than investors, has certainly had an impact.

We’ve been digging through the ABS data and come up with six charts that help to explain what is happening in Australia’s home loan market, not only in October but looking back further to evaluate just how the trends in lending have evolved.

All charts have been created using data provided by the Australian Bureau of Statistics.

New lending to housing investors fell by 6.1% to $11.49 billion in October. It was the smallest monthly increase since June 2014, and left lending to investors down 18.9% from April 2015. In comparison, lending to owner occupiers excluding refinancing increased by 0.2% to $14.35 billion, the highest level on record. Refinancing to owner occupiers rose by a further 0.8% to $6.8 billion, also a record high.

Compared to a year earlier, new investor lending fell by 9.2%, the steepest annual decline since May 2011. Excluding refinancing, lending to owner occupiers rose by 18.6% over the same time period, suggesting some lending that was traditionally deemed as investor is now being classified as owner occupier. Refinancing from owner occupiers increased by 26.9%, reflective of increased lender competition and low interest rates.

While new lending to investors has cooled in recent months, over the past 12 months it’s still outpaced that to owner occupiers ex-refinancing. Over the past year new investor loans totalled $157.3 billion, marginally shading that to owner occupiers which rose by $155.1 billion.

Including all home loan lending, and owner occupier refinancing, total housing commitments fell by 2% to $32.64 billion in October. From a year earlier the total value of commitments has risen 8.4%.

Likely as a result of loan classifications, the value of outstanding housing loans to owner occupiers increased to $911.75 billion in October, the largest level on record. The value of investor lending fell to $526.1 billion, down from $541.8 billion in September. Despite the divergence, the total outstanding amount of housing debt increased to $1.438 trillion, the highest level on record. In the past decade it has increased by $886.9 billion, or 161%.

In October the average home loan size for first home buyers rose to $355,700. For non-first home buyers it increased to $387,200 while the average fixed rate loan size ticked up to $353,500. Since the RBA’s current easing cycle began in November 2011, they’ve increased by 25%, 27.4% and 24.2% respectively.

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