Lending to Australian housing investors just came to a shuddering halt

Photo by Bill Pugliano/Getty Images

The value of lending to Australian housing investors tanked in April, according to figures released by the Australian Bureau of Statistics (ABS) earlier today.

Investor lending slumped by 5.0% from March to $11.291 billion in seasonally adjusted terms, the steepest percentage decline since October 2015.

Compared to a year earlier, the value of investor lending fell by 20.8%, an annual decline not seen since February 2009, the height of the global financial crisis.

It was also the smallest monthly total since June 2014.

While the value of lending to investors tanked, that to owner-occupiers ticked up, rising by 0.1% to $20.702 billion. Excluding refinancing, the value of lending to this category grew by 3.7% from a year earlier.

The value of refinancing of owner-occupier loans rose to $7.307 billion, the second highest level on record aside from December 2015. Compared to the levels of April 2015 it grew by 16.3%.

With investor and owner-occupier lending combined, the value of total housing loans slid by 1.8% to $31.993 billion.

It was the third decline registered in the past four months, and left the value of lending down 4.4% from 12 months earlier. It was also the fastest year-on-year percentage decline since March 2011.

Here’s the annual percentage change in the value of housing loans.

And here’s what it looks like in monthly dollar terms.

In terms of numbers, loans to owner-occupiers rose by 1.7% to 57,576, with borrowers purchasing established dwellings rising by 1.3% to 49,129.

Fitting with the recent uptick in building approvals data, loans for the construction of new dwellings jumped by 4.4% to 5,853 while those to purchase new dwellings climbed by a smaller 3.3% to 2,594.

Without seasonal adjustments applied, the percentage of owner-occupier lending to first home buyers rose to 14.4% from 14.2% in March.

The ABS does not release figures related to investor lending.

While the number of home loan approvals to owner occupiers increased solidly during the month, curiously, the sharp deceleration in the value of lending has not had an impact on house prices, at least not yet.

According to Tapas Strickland, economist at the NAB, there may be a simple explanation for the divergence. Housing turnover may also be slowing.

“House prices rose strongly in May, though there is some evidence that this may also reflect a low number of properties available for sale,” he said following the release of April report.

As communicated in the RBA’s June monetary policy statement released yesterday, Strickland believes that the marked slowdown in investor lending indicates, at the margin, that risks attached to the housing market are abating.

“It adds to the evidence that risks in the housing market have abated given that the investor share of approvals is now around 35% of the market, well down from its peak of 43% in May 2015,” says Strickland.

“Nevertheless, the RBA is likely to keep a close watch on housing market indicators to ensure the recent cash rate cut does not reignite risks.”

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