After slowing sharply earlier in the year following tighter restrictions by the banking regulator, APRA, there’s now clear evidence that investor activity in Australia’s housing market is picking up.
According to figures released by the ABS on Wednesday, the value of investor lending jumped by 4.6% to $12.416 billion in September, leaving the increase on 12 months ago at 9.6%.
It was the sixth month in eight that the value of investor lending increased. It was the largest monthly total in dollar terms since August last year.
According to economist Tapas Strickland, from the National Australia Bank’s markets division, the acceleration in investor lending, coupled with strong house price growth and very high auction clearance rates, challenges “the RBA’s assertion that risks in the housing market have moderated”.
“The pick-up in investor finance approvals and credit growth in recent months adds to the weight of evidence suggesting momentum in the housing market has picked up,” said Strickland following the release of the ABS’ housing finance report.
“That sentiment now appears to be entering into the RBA’s thinking with the November Board Statement noting prices in some markets had been rising ‘briskly’ over the past few months and will likely see the RBA closely monitoring housing market developments.”
As to where these risks are most acute, Strickland notes that acceleration in investor activity appears to be most post prevalent in new South Wales, and to a lesser degree, Victoria. While there will be some exceptions, it’s likely this is largely concentrated in Sydney and Melbourne, the state capitals.
“Separate data to be updated on Monday suggests the pick-up in investor activity is occurring in New South Wales, and to a lesser extent Victoria,” he says, noting that “both states are experiencing strong house price growth.”
Here’s the breakdown of monthly investor lending by state, courtesy of the NAB. It’s been colour-coded by the bank with New South Wales and Victoria — light and dark blue respectively — picking up as lending levels in other states decline.
According to data released by CoreLogic earlier this month, the median dwelling price in Sydney and Melbourne grew by 10.6% and 9.1% respectively in the 12 months to October.
From January 2009, prices in both cities have risen by more than 80%.
In recent months auction clearance rates in both cities have regularly exceeded 80%, a level that has historically led to strong house price gains arriving in the period ahead.
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