Lending to Australian property investors to purchase existing properties continued to grow in April, sidestepping efforts from APRA to cool recent growth.
According to the ABS, lending increased to $12.6331 billion, a rise of $425.3 million, or 3.5%, on March. Not only was the figure another monthly record, it took total lending growth over the past year to 23.44%.
An acceleration of that magnitude has the market talking. Some observers believe investors are creating a property bubble, particularly in Sydney’s hot residential market, while others believe it’s a perfectly normal market response given mortgage rates are sitting at multi-generational lows.
It’s a debate that isn’t going to dissipate anytime soon, and one that will only intensify as property prices continue to push higher.
Here are four charts, followed by a brief explanation on each, that provides a snapshot on recent activity by investors in the housing market.
The first looks at the lending growth for owner-occupiers, compared to investors, to buy an existing property.
In May the amount extended to owner-occupiers, excluding refinancing, to purchase an existing property totalled $9.7911 billion. That’s an increase of $532.4 million, or 5.75% on a year earlier. As mentioned above, the figure for investors buying an existing property was $12.6331 billion, some $2.399 billion more than a year earlier.
Expressed as a percentage, investor lending for existing properties was 29% higher than for owner-occupiers in April 2015 – a figure that’s been grown steadily higher since early 2014.
Just four years ago, investor loans for the same purpose increased by $6.667 billion, or 111.7%. For owner-occupiers the increase was $2.315 billion, or 31%.
The increase in the monthly amount extended to investors to purchase existing property is shown above.
In something that will no doubt interest both APRA and RBA, the amount of outstanding housing debt to investors grew by 11% in the year to April. Clearly some Australian authorised deposit-taking institutions are exceeding the ‘soft’ 10% speed limit applied by APRA to annual investor lending growth.
While the involvement of investors in the existing property market has attracted a lot of criticism, the upside is it may be filtering through to residential construction lending, which is steadily growing.
In April the total amount borrowed for residential construction was $2.7 billion a year-on-year increase of $270.2 million, or 11.1%.
Whatever your take on investor involvement in Australia’s property market, it’s clear stock market investors are becoming increasingly concerned about the likelihood of greater macroprudential measures being rolled out against the banks to cool their lending habits.
You can see that view unfolding today: before housing finance data was released at 11.30am, the ASX 200 financials index, dominated by banks, was up close to 1%. Now it’s down for the day.