Loan approvals for Australian housing investors continued to slide in June

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  • Data from the ABS showed loan approvals in Australia‚Äôs housing market fell by 1.6% in June, in seasonally adjusted terms.
  • There was a decline in loan approvals for both owner-occupiers and housing investors.
  • Loan approvals to housing investors have now declined by 29.7% from their peak.

Home loan approvals in Australia fell in June for both owner occupiers and housing investors, according to data released by the ABS this morning. The result missed consensus forecasts.

In seasonally adjusted terms, the value of housing finance fell by 1.6% to $31.2 billion over the month.

Consistent with recent trends, loan approvals for investor finance fell by another 2.7% in June to $10.382 billion. Investor loan approvals have now fallen by 29.7% from their peak.

After rising by 0.7% in May, finance for owner occupiers also fell in June, declining by 1% in seasonally adjusted terms to $20.85 billion.

The data appears to be reflective of a broader trend of a slowdown in Australian credit growth, with May’s uptick looking like a brief respite from tighter lending restrictions being implemented by Australian banks.

“Housing finance looks particularly weak in annual terms, despite a short-lived reprieve for the sequential run rates in May, and is currently declining at 5%,” said JP Morgan analyst Henry St John.

In particular, loan approvals to investors have slowed sharply this year, and the decline appears to be re-accelerating:

Source: JP Morgan

Despite the June decline for owner-occupier loans, the recent trend shows approvals in that category are still holding up better than investor demand.

However, St John said owner-occupier housing finance is still declining in annual terms across NSW, Victoria, Queensland, SA and WA.

“Some strength in owner-occupier lending was a necessary condition to prevent credit growth from slowing dramatically,” St John said.

“To this end, the current trend in new finance volumes is of some concern, and suggests that banks will likely continue to face decelerating housing credit growth over the coming months.”

In addition, St John said investor housing finance remains “in the doldrums”, amid tighter lending standards and the fallout from the banking royal commission.

“From the demand side, continued depreciation in property prices continues to erode the expected rate of return on new property investments, reinforcing the feedback loop between new lending and property prices in Sydney and Melbourne,” St John said.

“Taken in concert with the rising cost of finance, we expect investor lending will remain lackluster through the second half of 2018.”

Source: JP Morgan

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