Property investment lending is picking up again in Australia

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Australian housing finance data for March reveals both the value and number of new home loans written fell marginally during the month.

The total value of new loans fell by 0.2% to $32.736 billion, after seasonal adjustments, according to the ABS.

By type of buyer, the value of loans to owner-occupiers fell by 1.2% to $20.729 billion, offsetting an increase in new lending to housing investors which rose by 1.5% to $12.007 billion.

The 1.5% increase in March followed a 3.1% jump in February, indicating that investor lending may be accelerating following weakness in the second half of last year.

Adding credence to this view, investor lending has now increased in four of the past five months after registering six consecutive declines between May and October last year.

At $12.007 billion, the monthly increase in lending was also the highest recorded since September 2015.

The chart below shows a clear uptick in the value of lending to investors, something that has coincided with a decline in lending to owner-occupiers.

Although the decline could be representative of banks reclassifying some loans as those to investors, something that would explain the fall in the latter as lending picked up to investors, it is noteworthy that the recovery corresponded with increased chatter on potential changes to negative gearing seen earlier in the year.

In mid-February the Australian Labor Party unveiled plans to limit the negative gearing tax break to newly built housing and end it for existing homes, stating that it would grandfather existing arrangements for properties purchases up to June 30, 2017.

Whether that potential change in policy, and the possibility of the Coalition adopting a similar policy response (which it has subsequently ruled out), contributed to the increase in investor activity is difficult to determine.

In terms of the number of home loans issued, something the ABS does not report for investors, owner-occupiers loans fell by 0.9% to 56,316 in seasonally adjusted terms.

Loans for the purchase of new dwellings fell by 5.2%, while those for existing property dipped 0.5%. For housing construction, loans issued fell by 2.0%.

In original terms, the ABS reported that the percentage of owner-occupier loans to first home buyers fell to 14.2%, the lowest level reported since May 2004.

Although the monthly percentage tends to jump around due to the data have no seasonal adjustments applied, the trend is clearly lower, falling from 21.1% in December 2011.

In dollar terms, the average first home loan size was $328,700 in May while those for non-first home buyers was $362,200.

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