Loan growth to Australian housing investors just turned negative for the first time since 2009

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  • Housing investor loan growth fell by 0.1% in June, turning negative for the first time since February 2009.
  • The investor lending outlook is likely to impact on house prices “for the foreseeable future”, CBA said.
  • Broad money growth also slowed, while loans to housing owner-occupiers and businesses rose steadily.

Private sector credit data released by the RBA this morning showed housing investors continued their retreat from the Australian market in June.

Total housing credit rose by 0.3% in June, down from 0.4% in May.

And within the headline print, annual loan growth to housing investors hit a new record-low of 1.6% — eclipsing the previous month’s low of 2%.

Exacerbating the slowdown, credit growth to housing investors turned negative in June, recording a print of -0.1%.

Source: CBA

The result marked just the fourth time in history that investor loan growth declined in a given month, and the first time since February 2009 — at the height of the global financial crisis.

Commonwealth Bank economist Belinda Allen attributed the fall to both demand and supply-side factors.

Amid record-high household debt levels, “falling dwelling prices are deterring investors”, Allen said.

“This is reflected in weak auction clearance rates. Recent declines in the advertised rates of interest rates for loans also suggest softening in demand.”

On the supply-side, Allen noted the effect of tighter bank lending standards, in the wake of increased regulatory oversight led by the ongoing Royal Commission.

At the same time, she acknowledged comments from APRA chairman Wayne Byres, who said earlier this month that measures to constrain risky investor lending practices were now largely complete.

“Either way, this segment of the market is clearly slowing and is likely to continue to impact demand for housing and prices in the foreseeable future,” Allen said.

In addition, broad money growth rose by 0.2%, leaving annual growth at just 1.9% — the slowest rate of growth since the early 1990s recession.

Source: CBA

The broad money result is likely reflective of the ongoing slowdown in deposits from both retail and corporate customers — a factor which has contributed to tighter liquidity and higher funding costs for Australian banks.

Elsewhere in the data, loans to owner-occupiers rose by a steady 0.6% in June, resulting in annual growth of 0.6%.

Allen said a decline in house prices may have helped, evidenced by a rise in the “time to buy a dwelling” index in Westpac’s monthly survey of consumer confidence.

Business lending rose by 0.3% in June after a flat result in May, while personal credit (such as credit cards) was flat in June and down 1.3%, as Australian households remain cautious about spending.

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