The hot residential property markets of Sydney and Melbourne have been a talking point for many months now.
Month-after-month property prices in both cities – the largest housing markets in Australia by a significant margin – have continued to push higher, especially in Sydney.
Many point to investors as one of the chief catalysts for higher house prices. While some may disagree, on the evidence presented in the two charts below, it’s hard to argue they haven’t contributed, at least partly, to the steep run up.
The first chart tracks the amount of fixed-rate lending provided to NSW property investors, based on data provided by the ABS. The left-hand axis measures the monthly total while the right-hand axis tracks the rolling cumulative 12-month total.
The word parabolic immediately springs to mind.
In June the amount extended to property investors rose to a record $6.547 billion.
With new records being set in three of the prior four months, unsurprisingly, the annual figure jumped to $64.902 billion, also a record high.
To put that figure into perspective, in just 12 months, it grew by 31.9%, or $15.68 billion.
Compared to a decade earlier, it has increased by 137%.
The story of NSW is replicated by Victoria, with fixed-rate lending lending for property investment – both in monthly and annual terms – hitting a record high in June.
Month-on-month lending grew to $3.6437 billion, up from the previous record of $3.381 billion struck a month earlier.
Over the past year investor loans totalled $35.4152 billion, 23.7% higher than in the year to June 2014.
Clearly some fairly significant levels of growth, particularly given subdued economic conditions in the broader Australian economy.
After warning Australian key financial businesses, the ADIs (APRA-regulated authorised deposit institutions) in December 2014 to curb growth in lending to housing investors, it appears robust lending in June, coupled with strength earlier this year, were enough to see APRA, Australia’s banking regulator, act.
While some see these measures as reactive rather than proactive – akin to closing the gate after the horse has bolted – it will be interesting to see what impact, if any, the measures announced in recent weeks will have on lending to this component.
In the year to June Australian ADI’s lent a record $143.251 billion to property investors, an increase of $27.3 billion on the levels of a year earlier.
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