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.

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Friday, 15 April 2016

Property investment loans already bottoming out

Lending finance - a February rebound

APRA's crackdown has skimmed skimmed the high LVR property investors out of the market, but there still exists a relatively high level of demand for investor credit from those with the requisite serviceability that remain.

The ABS Lending Finance data series for February 2016 showed total lending finance across all measured sectors rebounding nicely in February, but against an underlying downtrend.

That's in part due to the APRA effect, which has effectively stymied the outlandish surge in property investment demand.

Breaking out the data into its component parts and using the smoother trend figures we can see that despite a solid rebound in February commercial lending has apparently lost some of its momentum, which is potentially underwhelming news for business.

Of course, from month to month the underlying business lending figures are lumpy, and there's no getting away from that.

But for the moment, at least, the trend appears to be softening.

The figures for personal finance at first blush appear to be almost comically soft, declining to levels last seen in 2007.

However, I do wonder about classification issues here, given the massive and increasing popularity of mortgage buffers, offset accounts, and redraw facilities. Not really sure about this, but it looks muchos weird to me. Let's pass on that one, Magnus!

At the state level, commercial finance in rolling annual terms has been trending up marginally in Queensland, but down in Western Australia. However, the latest figures suggest that WA may have at least arrested its decline.

Splitting out the commercial finance data by industry it is with no great surprise that we discover with that lending in the mining sector has been obliterated by about a third over the past year to be around 40 per cent below its peak.

Fortunately mining is only one part of Australian industry, and other sectors have fared considerably better, with business lending rates tracking at record lows.

Property investment loans

Macroprudential tools have been deployed in order to cap property investor credit growth at 10 per cent, while the RBA disclosed some of its thought processes in this regard this week - interesting insights indeed (imagine having your emails disclosed like that in the public domain, by the way!).

These moves have had the desired effect, and the focus has very much shifted towards owner-occupier lending.

That said the seasonally adjusted February Housing Finance data showed investment loans rebounding by +4.1 per cent in February to $11.9 billion, so there is still a reasonably high volume of investor activity in the post.

Indeed, investor loans are steadying across most states in February when looked at in rolling annual terms.

That said, activity in Western Australia was down by 20 per cent in February from the prior year comparative result, so there is possibly still some decline to come there, although a few analysts have already called the market bottom for Perth.

Investor activity in the Northern Territory has fallen to such a low level at about $46 million per month that it wouldn't even register as a blip on the above chart. The February result was down by 43 per cent from one year ago, so the trend line is shaping as if participating in a race to the bottom.

Not looking all that grand for Darwin, tbh!

The wrap

A decent rebound for Lending Finance in February, but there looks to be a softening tending in business finance.

Monthly investor lending activity looks to be steadying in New South Wales ($4 billion), Victoria ($2.6 billion), and Queensland ($1.5 billion), though there is still some potential softness in evidence elsewhere.

With some banks having offered fixed rate home loans as low as 3.99 per cent, anecdotally there was a strong month of owner-occupier lending in March.