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.

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"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'.

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Friday, 12 August 2016

Sydney property investors come surging back

Lending finance slowing

The ABS Lending Finance for June showed a further slowdown in commercial finance.

There was a large 8.7 per cent drop in commercial finance in seasonally adjusted terms in June, or 2.2 per cent in trend terms.

Yuck.

Housing finance, inclusive of investor lending, increased by 1.7 per cent in June, after a sequence of softer results earlier in the year.

Overall, though, total lending fell by 4.7 per cent in June to plumb a 19-month low. 


Lending totaled $64.6 billion in the month, some 12.6 per cent lower than one year ago.

This is pretty weak stuff, and one can only hope that recent interest rate cuts encourage businesses to get investing through lower borrowing rates or less stringent hurdle rates.

In saying that, and to keep things in perspective, lending finance is paring back down from a recent 7-year peak. 

Credit card debt and transaction volumes remain down over the past year, a useful indicator suggesting that consumers are very much enjoying low mortgage repayments.


Mining malaise

Annual commitments to the mining sector have absolutely crashed - down by 63 per cent since one year ago.

The only positive thing to say about this is that sooner or later, it will have to stop falling!



At the state level, I haven't been able to say much positive about the state economy in South Australia for some years now.

But...SA is the one state where total commercial lending is actually rising slightly in the face of macroprudential measures (albeit there has been no absolute improvement on the numbers seen in Q1 2008).



Property investor loans

The lending finance figures reveal some interesting trends in investor finance at the state level.

We already know from the housing finance figures that investor lending has been rising again in recent months, despite remaining well below previous peaks.

Since the state level figures are presented in original terms (i.e. not seasonally adjusted) they are plotted below on a rolling annual basis, which is often the best way we can get a feel for what's happening.

And that is to say, that tightening measures by the regulator have successfully slowed the annual value of investor loans. 



Sydney resurgence

Although lending has definitely pulled back, June itself was a massive month for investor loans in New South Wales. 

The general meme of the day is that investors are being clipped out of the market, but hopefully you're reading this blog to hear about tomorrow's new trends today!

Now, remember this is historic data, and interest rates have been cut twice recently:

NSW investor loans (original)

January - $3.11 billion

February - $3.89 billion

March - $4.46 billion

April - $4.50 billion

May - $5.29 billion

June - $5.75 billion

Gosh...

June was the sixth greatest month on record for NSW investor loans, and I believe that it won't be too long before we start seeing media articles on a Sydney property investor resurgence.

Darwin, on the other hand, is enjoying macro-prudential measures like a proverbial hole in the head. 

That said, investor loans in the Northern Territory may at least just be establishing a base.


The wrap

Overall, this was a weak result, which paves the way for even lower interest rates later in the year.

Fair warning, though - Sydney investors are back on the march, and APRA may need to tweak its regulatory measures again before too long.