Property investment lending in Australia just hit its lowest level in more than a year

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Australian housing finance data for September has come in below expectations with both the number and value of loans falling from a month earlier.

On top of weaker price growth and clearance rates, it’s another sign the local housing market is cooling.

According to the Australian Bureau of Statistics (ABS), the value of housing finance slid by 3.6% to $32.5 billion in seasonally adjusted terms, leaving it at the lowest level since April.

It was the steepest monthly decline in percentage terms since January 2016 and left total finance unchanged from a year earlier. It previously grew by 7.7% in the 12 months to August.

In dollar terms, the value of loans to owner-occupiers fell by 2.1% to $20.665 billion after seasonal adjustments, the largest percentage drop since July 2016.

That saw annual growth slow to 3.8%, down from 8.5% in August.

Within that figure, the value of owner-occupier loans excluding refinancing fell 2.1% to $14.775 billion, leaving growth on a year earlier at 13.3%. It previously stood at 17.1% in August.

The value of owner-occupier refinancing also declined, falling by 2% to $5.89 billion, leaving the decrease over the year at 14.1%.

The decline in owner-occupier finance was outpaced by a sharp drop in the value of loans to investors which fell by 6.2% to $11.837 billion in seasonally adjuster terms.

It was the smallest monthly total since June 2016, reflecting recent actions by Australia’s banking regulator, APRA, to cool investor activity in the housing market.

“APRA’s macroprudential policy, aimed at investors and interest-only loans in particular, appears to be having the desired effect of taking some investor demand out of the market,” said Daniel Gradwell, economist at ANZ Bank.

Compared to the same month in 2016, investor housing finance fell by 6%, the largest drop in over a year.

The ABS said the value of outstanding home loan balances to Australian authorised deposit-taking institutions (ADIs) grew to $1.6156 trillion in unadjusted terms, a record high. Outstanding owner-occupier loans stood at $1.057 trillion while those for investors rose to $558.718 billion.

Explaining the weakness in value of loans issued, the number of new loans to owner-occupiers also fell, dropping by 2.3% to 55,812 in seasonally adjusted terms.

Loans to buy existing dwellings and construction fell by 2.6% apiece to 46,443 and 6,162 respectively. Loans to purchase new dwellings bucked the trend, rising by 1.8% to 3,206.

Reflecting recent state government measures to help improved housing affordability in New South Wales and Victoria, the ABS said the proportion of owner-occupier loans to first home buyers rose to 17.4% in unadjusted terms from 17.2% in August.

The ABS does not release information on loans issued to investors as part of the housing finance report.

Gradwell says the details of the September report suggest the housing market will continued to cool into 2018, a result he says will please policymakers at APRA and the RBA.

“We believe [they] will be encouraged by the slowdown in investor borrowing,” he says.

“While household debt is still growing faster than income, developments such as this allow the regulator and RBA to be patient.”

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