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Thursday, 10 December 2015

Investor boom is a cooked goose

Housing finance flatlines

At the headline level it was another spirited month for Housing Finance nationally, with the seasonally adjusted $32.6 billion in October being the sixth greatest month on record following a lending blitz through 2015.

Although owner-occupier commitments increased again in the month, investor finance continued to slump, dropping by 6.1 per cent.

The devil of this data series forever lies within the detail, with a number of sources indicating that there has been a level of jiggery-pokery with regards to the classification of loans between owner-occupiers and investors (since there is now a clear price incentive to opt for homebuyer loans).

The second chart below shows that owner-occupier commitments and refinancing have both increased solidly, while APRA's macroprudential measures have ensured that investor finance is now falling away quickly.

The net result was that total housing finance in trend terms remained flat in the month at $33.2 billion.

Whether or not housing markets can push forward in 2016 will depend upon the extent to which the growth in owner-occupier loans can offset declining investor lending. 

Certainly we can see that the number of owner-occupier loans is trending up, but equally there is a chance that tightening mortgage rates could slow this sector of the market going forward.

State versus state

Skipping down to the state level we can see that the trend number of owner-occupier commitments is in decline in Western Australia, Tasmania, the Northern Territory, and Queensland, which is home to a significant number of declining regional markets in line with the resources investment collapse.

The trend in the number of owner-occupier commitments in the Australian Capital Territory has been stone dead flat for months.

The increase in the number of mortgages written has been driven purely by the two most populous states, New South Wales and Victoria. 

Generally speaking the higher value loans are written in the capital cities, and as such the dollar value of owner-occupier commitments tends to be a better indicator of what is playing out in the capitals.

In terms of the trend value of owner-occupier commitments, both Western Australia and the Northern Territory are again in decline. 

The Brisbane market is faring relatively well at the present time, helping to nudge the aggregate value of owner-occupier commitments in Queensland steadily up, while Victoria and New South Wales in particular are rising fast.

In fact, trend monthly owner-occupier commitments in New South Wales have ripped up the chart to sit some 43 per cent higher over the year at more than $8 billion (awooga!).

As noted, when it comes to housing finance the devil is always in the detail: more than $3 billion of the New South Wales monthly figure related to refinancing, and over the past year there has also been a slight uptick in finance for renovations.

Nevertheless, this still leaves $5.4 billion of owner-occupier dwellings financed for a 32 per cent year-on-year increase, in turn implying that those waiting for a significant correction in Sydney's established housing sector are likely to be disappointed again in 2016, although some outer and fringe suburbs in the harbour city are reportedly already experiencing this.

The wrap

Overall, there are many more different trends to cover than can be analysed in one blog post - it was a solid result nationally, and it all rather depends upon which market you are interested in.

One thing that we can say with certainty is that the investor boom is a cooked goose for this cycle, with investor finance now down by 9.2 per cent year-on-year. In 2016, the homebuyer sector of the market will swim back into focus.

I'll look at the investor loans sector in more detail at the state level on Friday.


Labour Force figures due out today. Expect to see a reversal after last month's bonanza headline result of 58,600 jobs created, which alas was doubtless too good to be true!