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Saturday, 31 December 2016

Housing market pivots back towards investors

Broad money

Annual credit growth ticked up to 5.4 per cent in November 2016, while the growth in broad money increased by a somewhat stronger 6.4 per cent. 

Deposit growth has been very strong in recent times, and as banks tweaked deposit rates term deposits saw a solid 8.8 per cent increase over the year (following a long period of being understandably shunned by yield-starved investors).

Investor rebound

Business credit had a better month to see annual credit growth ticking back up to 4.9 per cent, while housing credit continued to cruise along at a 6.3 per cent annual growth.

Housing credit seems to be maintaining a fairly consistent rate of growth, but within the headline figure annual credit growth relating to investors is speeding up from 4.6 per cent in August to 5.6 per cent in November.

The regulator has set an arbitrary speed limit of 10 per cent for investor credit, so if this uptrend continues APRA may well be getting twitchy fingers by the second half of 2017. 

Total business credit increased to a record $868 billion in November, but the pace of growth has continued at a slower pace than housing credit, while personal credit is actually shrinking. 

The annual increase of housing credit of 6.3 per cent was slower than the 7.4 per cent seen at the same last year, though a glance at a compound interest table shows that this rate of growth still implies a doubling in less than a dozen years. 

With business credit growth only moderate, and personal credit in decline with mortgage buffers and the use of offset accounts at record levels, the share of outstanding credit relating to housing is now 61.4 per cent, up moderately from 60.9 per cent a year ago.

The wrap

A better result for business credit this month, while housing market momentum appears to have pivoted back towards investors after previous regulatory intervention. 

The rate of investors credit growth is a trend to watch for 2017.

CoreLogic's final housing market index figures for 2016 showed that Sydney recorded the strongest increase in home values over the calendar year at 15.46 per cent, although Melbourne wasn't all that far behind with 13.68 per cent. 

Brisbane was much steadier, at 4.40 per cent growth.