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Friday, 30 September 2016
Slowing credit growth masks inner suburb boom
Investor credit slows
The latest Financial Aggregates figures from the Reserve Bank of Australia (RBA) for August showed the growth in investor credit slowing to +4.6 per cent, the lowest annual result in the nearly seven years since November 2009.
The considerably larger owner-occupier sector has by and large plugged the gap, with credit growth for homebuyers rising at a rate of +7.6 per cent over the year to August.
Overall credit growth was up by +5.8 per cent over the year, a bit behind broad money growth of +6.3 per cent.
Disappointingly, business credit growth was soft in the month of August, taking annual growth back to +5.7 per cent.
Housing sectors blurred
Over the past year some $44 billion has been conveniently reclassified by loan purpose from investor to owner-occupier, although the net value of switching has been adjusted for in the rates of credit growth.
Whatever the true story is in terms of the split of investors versus homebuyers, the bigger picture is that total housing credit outstanding increased at a rate of +6.5 per cent, up to $1.58 trillion in August.
And throwing in the business sector, this takes the total credit sloshing around the joint up to $2.6 trillion.
The composition of credit remains remarkably skewed to housing, hitting a record 61.1 per cent of the pie.
Housing credit growth is slowing in aggregate, but it's slowing from a very high base. In fact, there's now nearly $1.6 trillion of housing credit in total.
Despite the apparent 'slowdown' in the rate of growth, a number of different data sources have shown that the big capital city inner suburban housing markets are booming.
The reasons behind the inner suburban housing market boom are arguable.
Personally, I've long believed it's mainly a lifestyle thing as the city population grows and travel times increase - as well as that international students and foreign money tend to gravitate towards the inner cities (all the more so as the dollar declines).
I mean, it literally took me 45 minutes to get out of Kingsford Smith the other day.
And as for Parramatta Road...well, it's an absolute Barry Crocker.
In short, like many people I'd rather live in an overpriced apartment on the harbourside or at Bondi beach than in an overpriced house out west. And that's pretty much it!