Australian housing investor credit is growing at the slowest pace since 2009

SERGEI GAPON / AFP / Getty Images

Australian housing credit growth continued to slow in July, providing just the latest mixed message on the current state of Australia’s housing market.

According to private sector credit figures released by the Reserve Bank of Australia (RBA), housing credit expanded by 0.5% in July, leaving it up 6.6% on the levels of a year earlier.

While still a decent clip, it marked the the slowest annual expansion seen since August 2014, nearly two years ago.

By component, credit to owner occupiers increased by 0.5%, taking the annual rate of growth to 7.6%, just shy of the multi-year peak of 7.7% seen in June.

At the other end of the spectrum, and explaining the continued deceleration in the headline rate, credit extended to investors increased by 0.4% — the third such increase in a row — leaving year-on-year growth at 4.8%.

Not only was this the slowest annual increase to investors seen since November 2009, it is now running at less than half the annual rate targeted by Australia’s banking regulator, APRA.

Just 13 months ago, credit growth to investors had been running at an annual clip of 10.8%.

In absolute terms, the value of outstanding owner occupier housing credit now stands at $1.0236 billion, near double the $552.6 billion figure for investors.

While housing price growth has slowed noticeably in 2016, the deceleration may be due to lower housing turnover over the same period.

There are less properties being sold, hence less credit being extended by lenders. A preference to pay down existing debt may also be a factor.

As was the case with housing credit, figures for business and personal credit were also weak, painting a picture of tepid demand from Australia’s private sector.

Business credit increased by 0.3%, recovering from a 0.2% drop in June, leaving the annual pace of growth at 6.2%, the weakest seen since January.

Suggesting that consumer caution continues to reign, and that household consumption could disappoint in the June quarter, personal credit fell by 0.1% for the seventh consecutive month, leaving the annual decline at 0.8%. It equaled the decline seen in June, and was the largest contraction seen since August 2012.

Combined, housing, business and personal credit grew by 0.4% for the month — in line with market expectations — leaving the annual expansion at 6%, a 13-month low.

In a nutshell, the July report was weak, providing no indication that lower interest rates (or the prospect of a cut in August that was duly delivered) led to an increase in credit demand.

Savanth Sebastian, an economist at Commsec, suggested that the figures were a reflection of how the economy was tracking in a pre-election environment.

“It was pretty clear that activity levels across the economy slowed in response to the election,” says Sebastian, acknowledging that “in that context lending has helped up relatively well”.

“With the election well and truly in the review mirror, the Reserve Bank will be hoping that the economic activity lifts from here – especially as households and business respond to the recent rate cuts,” he says.

Here are the annual rates of housing, business and personal credit growth seen over the past decade:

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