Lending to Australian housing investors is falling off a cliff

Photo: Mike Hewitt/Getty Images.

Fitting with deteriorating sentiment towards Australia’s property market and tighter restrictions on home loan investor lending, the number and value of new home loans fell modestly in October.

According to the ABS, the number of new home loans to owner-occupiers fell by 0.5% to 55,571 in seasonally adjusted terms. Loans for new construction, along with the purchase of new and existing dwellings, also slid by 0.4%, 1.6% and 0.5% respectively.

With the number of home loans falling so too did the value of new lending, although as has been the case in recent months a sharp decline in lending to housing investors was partially offset by a further increase to owner occupiers.

Lending to investors slid by 6.1% to $11.49 billion while that to owner occupiers rose 0.4% to $21.153 billion. In overall terms, the value of new lending fell 2.0% to $32.643 billion.

As the chart below demonstrates, having soared in recent years, new lending to investors is falling of a cliff. At $11.49 billion in October, the monthly increase was the smallest seen since June last year. From April 2015, when lending to investors hit a record high of $14.17 billion, the value of lending has now fallen by 18.9%.

While lending to investors had fallen sharply – in line with recent measures introduced by APRA to stymie lending to this sector – lending to owner occupiers, excluding refinancing, rose to $14.35 billion — the highest level on record. Owner occupier refinancing also rose to $6.8 billion, again the highest level on record.

Despite the twin pair of records set for owner occupier lending, the total value of housing commitments has also fallen modestly, albeit from record levels.

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