Why Australia's latest housing credit data points to further price declines ahead, in one chart

Picture: Getty Images

Growth in Australian housing credit continues to slow, especially to investors.

According to data released by the Reserve Bank of Australia (RBA), the outstanding value of housing loans grew by just 0.3% in seasonally adjusted terms, leaving the change on a year earlier at 5.6%, the weakest increase since early 2014.

The continued moderation reflected that credit to housing investors actually contracted over the month, falling 0.1%, the first decline since February 2009.

That was peak GFC territory.

Over the year, investor credit growth slowed to 1.6%, the weakest increase on record. In contrast, credit to owner-occupiers grew by 7.8%, but that too was down from the recent cyclical peak of 8.1% seen earlier this year.

This investor-led slowdown, largely reflecting the impact of tighter lending standards, has already left its mark, seeing home prices in Sydney and Melbourne — two markets previously favoured by investors — decline over the past year.

Based on the chart below from ANZ Bank, there could well be further falls to come.

ANZ Bank

It shows ANZ’s housing credit impulse — measuring the speed of the change in housing credit growth — overlaid against the annual change in Australia’s median home price, according to CoreLogic data.

The former is still accelerating lower, something ANZ says points to further price weakness ahead.

“The data show that the housing credit impulse continued its downward trend [in June],” it said.

“As long as this remains the case, housing prices are likely to keep falling, which is what we expect.”

We’ll receive further information on that topic on Wednesday when CoreLogic releases its monthly Home Value Index for July. Based on data released during the month, a decline of around 0.5% is likely.

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