Australian housing investor credit continued to expand at a decent clip in April, according to data released by the Reserve Bank of Australia (RBA) on Wednesday.
The RBA said that credit to investors grew by a further 0.6% in seasonally adjusted terms, the same pace recorded in March. It left total growth over the year at 7.3%, the fastest increase seen since January 2016 and an acceleration on the 7.1% pace of March.
The report measures changes in the total value of outstanding loans issued to Australia’s housing sector.
While the pace of credit growth to investors was unchanged from a month earlier, it suggests that measures introduced by Australia’s banking regulator, APRA, to cool investor activity have yet to have an impact.
But it’s only early days, as the RBA alluded to earlier this month.
In the minutes of its May monetary policy meeting, the RBA said that “it would take some time to assess the full effects of recent increases in mortgage rates and the additional supervisory focus”.
Henry St John, economist at JP Morgan, said that it’s likely to take some time for the full impacts of recent regulatory tightening to be felt.
“Despite April representing the first month in which macroprudential policy changes were in full effect, any slowdown in bank mortgage growth will likely first be seen in lending growth, before it begins to appear in the credit numbers,” he said following the release of the report.
The 0.6% increase in investor credit growth also outpaced that to owner-occupiers, something that has been the case in each of the past eight months.
It expanded by a smaller 0.5% — maintaining the same pace reported in the prior five months — leaving the increase on a year earlier at 6.1%.
The annual increase was the slowest reported since September 2015.
Combined, total credit issued for housing expanded by 0.5%, leaving the year-on-year increase at 6.5%.
As seen in the chart below, the annual growth rate appears to have levelled off after a slowdown from the middle of 2015.
Outside of housing, and continuing a familiar trend, demand for credit from Australia’s businesses and consumers remained weak.
The RBA said that credit to businesses grew by 0.4% from a month earlier.
While the fastest increase reported since December last year, and an acceleration on the 0.1% expansion of March, it saw annual growth slow to 3.1%, the weakest that it’s been since May 2014.
Not a great sign for the outlook for business investment.
And that could also be said on the outlook for household consumption with personal credit growth contracting for a 16th consecutive month.
It fell by a further 0.1% in April, leaving the year-on-year contraction unchanged at 1.5%. That equalled the largest annual decline in credit for personal use since November 2009.
That suggests that households remain reluctant to borrow right now, unless it’s to purchase housing.
“These business and household statistics continue to reiterate the trend of weak business capex and consumer spending observed over the past 12 months,” St John said.
Combined, total credit issued to Australia’s private sector grew by 0.4% from March, seeing annual growth slow to 4.9%, the slowest expansion in close to three years.
While housing credit continues to hum along, with it showing signs of stabilising and credit growth elsewhere either decelerating or going backwards, the door to further interest rate cuts remains ajar, if and when the RBA needs it.
Much will be determined by the performance of the Australian economy, along with developments in the housing market.