Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Monday, 16 November 2015

Shifting sands (record NSW lending?)

Lending finance

The ABS released its Lending Finance figures for the month of September 2015 which showed a seasonally adjusted 9.5 per cent jump in commercial finance, though in trend terms commercial finance has looked somewhat peaky.

Total lending finance increased from a seasonally adjusted $70.7 billion in August to a new cyclical high of $75.3 billion, another signal that low interest rates are gradually biting and having a positive impact on credit flows.


Although there have been instances of stronger monthly results for lending finance - a flood of recapitalisation through the financial crisis saw spikes in June 2007 and January 2008 respectively - the monthly trend result has now hit a fresh high of above $73 billion.

Shifting composition

With APRA having clamped down on property investment loans, lenders are evidently pushing owner-occupier products harder, with the red line in the chart below denoting another 3 per cent increase in the month to beyond $21 billion.

In trend terms owner-occupier lending has surged more than 20 per cent higher over the past year, while major renovations activity ("alterations and additions") trended up to its best result in four years.


As I looked at in more detail here during the week, the great surge in owner-occupier loans over the past year has been almost entirely accounted for by New South Wales and to a somewhat lesser extent Victoria.

Mirroring figures previously reported by the Reserve Bank (see here for my analysis of the RBA's Financial Aggregates data), September was a healthy result for commercial finance with a 9.5 per seasonally adjusted jump in the month to $46.1 billion.

While the trend result looks peaky, this can be a rather unpredictable series, and in rolling annual terms commercial lending has surged 50 per cent higher over the past half decade to sit at its highest level in some 7.5 years.

Property investor loans clamp-down

Loans to purchase investment property are now clearly softening, which overall is a healthy sign for residential real estate markets which had become far too top-heavy with investors, resulting in rising vacancy rates and declining rents in some regions.

On a rolling annual basis NSW investment loans tore out a new record of $67.9 billion, but this particular peak is now close to being in following three months of softer results.

In June the Premier State had seen an unprecedented $6.6 billion of investor loans written in a single month, but over the last two months of available data the total dollar value of NSW property investment loans has come in at around $5.6 billion (which is nevertheless still a huge volume in historical terms).


Despite the softening in investment loans, with the volume of NSW owner-occupier lending booming by an astonishing 46.2 per cent over the past year, September was the greatest month on record for total NSW property lending at well over $14 billion at the state level.


Now it may be that some of the outlandish $8.55 billion of NSW owner-occupier lending in September was bogus - or at least not genuinely representative of new property market demand - with some existing owners having opted to refinance following the tightening of mortgage rates by some lenders.

At the sub-regional level it would be no surprise on this evidence to see ongoing strong auction and property market results in some of Sydney's inner ring, particularly in the eastern suburbs.

However it's clear that the heat has already come right out of the western and outer south-western suburbs, leaving some recent buyers wondering what they've let themselves in for.

Generally speaking APRA's macroprudential measures have been effective in slowing the pace of investor lending right across the board. Next up, I'll take a look at the trends in investor lending across each state and territory.