Australian home loan lending rose again in June, led by a surprise jump in the value of investor loans.
According to the Australian Bureau of Statistics (ABS), housing finance rose by 0.8% to $33.261 billion during the month in seasonally adjusted terms.
The increase followed a 1.4% increase in June and left the value of housing finance up 2.9% on the levels of a year earlier.
As early as January this year annual growth had been running in excess of 10%, offering further evidence that housing market activity it cooling, albeit slowly.
Loans to owner-occupiers grew by 0.3% to $20.738 billion, with a drop in refinancing overridden by a solid increase in new lending.
Excluding refinancing, lending to this cohort rose by 1.4% to $14.76 billion. It was the fifth consecutive monthly increase, and left lending up 8.3% on the levels of a year earlier.
Refinancing of existing facilities fell by 2.3% to $5.98 billion after a 5.8% surge in June, something that was likely driven by repricing of interest-only loans by lenders in response to tighter macroprudential measures introduced by Australia’s banking regulator, APRA.
From a year earlier, the total value of owner-occupier refinancing slid by 12.9%.
After falling in April and May, the value of lending to investors rose solidly, increasing 1.6% to $12.52 billion. It was the largest percentage increase since January this year.
Despite that rebound, the year-on-year increase in investor lending slowed to 5.7%, down from 8% in May and well below the 22% increase recorded in the year to November 2016.
On that evidence, it suggests that APRA’s attempts to curb lending to investors is working, although it appears that has largely been ofset by a pickup in lending to owner-occupiers.
With the value of owner-occupier and investor loans both increasing during the month, the value of total outstanding housing loans rose to $1.607 trillion, the highest level on record.
Over the past decade, the level of outstanding housing debt has increased by 149%, or $962.8 billion.
Outstanding loans to owner-occupiers stood at $1.047 trillion with those to investors rose to $460.47 billion. Both are record highs.
In volume terms, the ABS said that the total number of home loans to owner-occupiers rose by 0.5% to 54,404 in seasonally adjusted terms, missing economist forecasts for a larger increase of 1.5%.
However, looking at the breakdown of that figure, it masked some pleasing developments on the outlook for housing supply.
The ABS said that loans to construct a new dwelling jumped by 3.6% to 6,290, marginally outpacing a 3.5% increase in loans to buy a new dwelling which increased to 3,016.
Explaining the soft headline figure, loans to buy an established dwelling fell, sliding 0.1% to 45,099 on the back of lower refinancing levels.
“The undershoot.. appears to be a function of weaker than expected refinancing activity, which likely stems from enhanced macro-prudential measures weighing on banks’ lending activity,” said Tom Kennedy, economist at JP Morgan.
Along with the pleasing breakdown of the housing commitments figure, there was also good news on the level of first home buyer activity.
In original terms, first-time buyers made up 15% of total owner-occupier loans written during the month, the highest proportion since February 2015. It had been as low as 12.9% in March 2016.
The ABS does not release figures for total investor loans written as part of its housing finance report.
Despite the rebound in investor lending reported in June, Kennedy expects that trend will prove fleeting.
“Investor loan shares have been trending lower since late last year and we expect this theme to continue in the coming quarters as banks are forced to reconfigure their loan books,” he said.
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