There are signs that APRA’s move to curb investor activity in Australia’s housing market is starting to work.
The value of new investor lending fell heavily in April.
According to the ABS, the value of investor lending fell by 2.3% to $12.582 billion in seasonally adjusted terms, the weakest monthly total in seven months.
While total investor lending was still up 14.1% from a year earlier, the annual pace of growth now sits well below the 26.7% level reported in January this year.
Investor lending is now cooling, an outcome that will no doubt please the RBA and APRA.
“This is no surprise given the combination of out of cycle rate hike largely aimed at investors and the introduction of additional macroprudential regulation by APRA in late March,” said economists at ANZ.
“The data suggest those measures have had an immediate impact, an encouraging development for the RBA and the regulator.”
And it wasn’t just investor lending that weakened in April, but also to owner-occupiers too.
The ABS said that the value of finance to this cohort fell by 1.1% to $19.892 billion, thanks entirely to a continued decline in loan refinancing.
Excluding refinancing, new lending rose by 0.3% to $14.119 billion, the highest level since September 2015. That left total new lending to owner-occupiers up 6.2% from a year earlier, almost exactly the same as March.
Refinancing, on the other hand, continued to decline, sliding by 4.4% to $5.773 billion, the weakest monthly total since May 2015. Over the past year the value of refinancing has fallen by 17.8%, the steepest decline in nearly seven years.
With owner-occupier and investor lending both easing over the month, total housing finance fell by 1.6% to $32.474 billion.
While still an increase of 3.6% on the levels of a year, the monthly total was below the recent record peak of $33.758 billion reported in January this year.
At the start of 2017 housing finance was growing at an annual pace of close to 11%, with the recent deceleration providing further evidence that an investor-led slowdown is currently underway.
“We expect further slowing in the investor segment in coming months and broadly see the housing market as cooling from here,” said ANZ.
The total value of outstanding home loans with Australian authorised deposit-taking institutions (ADIs) now stands at $1.588 trillion. $1.032 trillion of that is owed by owner-occupiers with $555.9 billion to investors.
Helping to explain the weakness in owner-occupier lending, total loan commitments to this group fell by 1.9% to 53,062.
The ABS said loans to purchase established dwellings weakened by 2.3% to 44,443, while those to purchase a new property fell by a larger 3% to 2,755.
Henry St John, an economist at JP Morgan, noted that the slowdown in housing finance commitments was evenly distributed across Australia.
“The weakness in lending appeared well distributed across Australia, with owner-occupier lending volumes declining in all states except for Western Australia, which grew a modest 0.6% month-on-month,” he said.
“The trend appears particularly weak in the major markets of New South Wales, Victoria and Queensland, where 3-month lending rates are annualising at -12.2%, -12.7% and -24.2%, respectively.”
Encouragingly, loans to construct new dwellings bucked the trend, rising by 2.1% to 5,864, offering some hope that the expected decline in housing construction over the next few years will be be slow and measured.
“While housing finance figures released today show that overall lending slowed in April, the number of loans to households building new homes reached its highest level since 2015,” said Geordan Murray, senior economist at Australia’s Housing Industry Association (HIA).
Hinting that the slowdown in investor activity may be helping Australian first-home buyers, the ABS said that the percentage of owner-occupier loans to this group rose to 13.9%, the highest proportion since July 2015.
Still a very low level, but a small improvement in the record low level of 12.9% reported in March 2016. It must also be remembered that this only captures first-home owners entering the market as owner-occupiers, not investors.