Lending to Australian housing investors just had its largest decline in more than a year

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Australian housing investor finance fell sharply in February, according to data released by the Australian Bureau of Statistics (ABS) on Monday.

The ABS said that lending to investors fell by 5.9% to $12.923 billion in seasonally adjusted terms, the largest decline in percentage terms since September 2015.

It completely reversed the 4.6% gain recorded in January and saw the year-on-year increase slow sharply to 14.0% from 27.3%.

While the decline came before the introduction of new macroprudential measures from by Australia’s banking regulator, APRA, in late March to limit interest-only mortgage lending to just 30% of total new mortgage lending, the pullback corresponded with news that several major Australian bank’s had curtailed lending to housing investors ahead of this announcement.

It also followed the resumption of out-of-cycle mortgage rate increases to investor loans, something that has since continued in recent weeks.

On early evidence, it appears that this has had an impact even before the official announcement from APRA was released.

“This policy change, combined with the coincident out-of cycle mortgage rate re-pricing, may hit housing demand ahead and see slower home loans/credit/price growth,” said economists at UBS following the release of today’s report.

While the dollar value of lending to investors fell sharply, that was not mirrored by lending to owner-occupiers which fell 0.5% to $19.997 billion in February.

And that was entirely due to lower levels of refinancing, rather than a decline in new owner-occupier finance.

Excluding refinancing of existing owner-occupier facilities, the value of lending rose by 1.5% to $13.83 billion.

From a year earlier it rose by 1.5%, down from the 5.8% increase reported in the 12 months to January.

Explaining the weakness in the headline figure, the value of owner-occupier refinancing slid 4.8% to $6.167 billion, the lowest total since July 2015.

Mirroring the slight moderation in the dollar value of finance, the number of loans to owner-occupiers also fell modestly.

In seasonally adjusted terms, the ABS said that total owner-occupier loans fell by 0.5% to 54,816.

Those to purchase existing properties fell 0.4% to 46,564, while those to buy new residential dwellings falling by a larger 7.1% to 2,618.

Loans to construct new owner-occupier housing stock bucked the trend, rising 1.7% to 5,634.

The ABS does not release the number of loans issued to investors as part of the housing finance report.

In original terms, the ABS said that the proportion of owner-occupier loans going to Australian first-home buyers fell to 13.3% from 13.4% in January.

Though it remains near the lowest levels seen in several decades, it must be remembered that some first-time buyers may be now entering the market as investors, rather than owner-occupiers.

According to the latest Australian Residential Property Survey released by the National Australia Bank last week, investor first-home buyers accounted for 9.9% of total existing housing sales in the March quarter, down from 12.9% in the final three months of 2016.

The NAB said that first-home owner-occupier buyers accounted for 16.6% of total existing properties sold during the quarter, up from 15.6% in the December quarter last year.

In total, first-home buyers accounted for 26.5% of established property sales, their lowest level since Q3 2015,” said the NAB.

Source: NAB

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