Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

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.

Tuesday, 19 January 2016

Trend high for lending finance

Commercial lending picks up

Futures markets have been assigning fully a 100 per cent chance of an interest rate cut by the second half of this calendar year.

Yet the ABS Lending Finance figures for November released today suggested that low rates and a lower dollar may just be gaining a little more traction, with total lending increasing to a new trend high of $74.7 billion.

In seasonally adjusted terms, total lending was some 20 per cent higher than one year ago. 


Importantly, commercial lending picked up by a seasonally adjusted 1.1 per cent in the month, hinting at somewhat brighter news for Australian businesses, with business loans up by 23 per cent over the past year and revolving credit commitments up by 21 per cent.

Arguably some of this additional lending might have been sparked by macroprudential measures taken to slow investment property loans. 

If that is truly the case, then it was a kick up the backside that Australian banks and lenders surely needed. The alternative narrative may simply be that the lower dollar is gradually encouraging competitiveness and investment. Your call.

Lending to owner-occupiers for housing purchases and construction continues to rise very strongly at the national level, trending up by 24 per cent over the year to a new high of $22 billion, although lending for major renovation activity has remained resolutely in the (unrenovated) doghouse.

Meanwhile, personal finance lending continues to slide (except for cars!) to sit at 9 year lows, suggesting that consumers are behaving rather more cautiously.


Investor loans consolidate

I looked at the surprisingly strong November Housing Finance data last week here

The Lending Finance release today provided more detail at the state level, and it revealed a moderate rebound in November investor lending in New South Wales ($4.8 billion), Victoria ($2.8 billion), Queensland ($1.6 billion), and South Australia ($0.4 billion). 

Looked at in rolling annual original terms, the chart will now begin to show that cooling macroprudential measures initiated by the regulator APRA have tamed the investor beast. 

The latest available figures - as well as initial forays back into the investor market by banks such as AMP and Suncorp - imply that monthly investor lending may begin to track at around $11 to $12 billion per month, well down from the all-time record $14.2 billion we saw in April 2015.


A cautionary word to be noted here is that in some markets the slowdown in investor lending has largely been matched with an increase in owner-occupier lending, suggesting that loan finance is seeking the path of least resistance.

To take the example of New South Wales, total November housing finance of $13.9 billion in original terms suggests that in aggregate lending has been fairly flat for the past five months, and is still up by 19 per cent from a year ago.

Thus while investor loans are down by about 12 per cent over the year, owner-occupier lending has gone berserk to be up by 48 per cent over the year. 



It is far from such a buoyant picture everywhere, however. With asking rents having tanked, investor loans are decelerating at an alarming pace in the Northern Territory, and this time around there may be no China-led commodities boost to save the day.


As such, all key indicators are pointing to a significant and arguably overdue correction in the Darwin property market.