Lending Finance to investors rockets
Not really much need for many words today, since my viewpoint has been made too many times on this blog already.
Today's ABS Lending Finance data showed owner occupier lending increasing by a seasonally adjusted 1.4% to $16,911 million in April.
And, as noted here too many times already, with the lowest borrowing rates we've seen in decades, investor lending appears likely to simply keep on increasing and pushing up the price of certain well-located dwelling types until either (a) interest rates are normalised (which is looking light years away at this juncture) or (b) more stringent macro-prudential tools are deployed, whenever that may be.
Unsurprisingly, investor finance is now trending up across every state, but it is worth making the point once again that the flow of funds will be disproportionately skewed towards Sydney.
The impact of investor loans is likely to be minimal in low-demand regional areas and states where property investment is not considered to be popular.
Hot in Sydney...
By way statistical evidence, New South Wales investor loans increased in value on a rolling 12 monthly basis to yet another all-time record high of $46,346,211,000 - that is, $46,346 million.
In other words, investor activity is comfortably now sitting at a record high level which will drive the prices of certain property types in favourably located suburbs close to the city higher (click chart):
An unprecedented 46.8% of loans in New South Wales was for investment purposes in the month of April, implying in turn that more than half of loan values in the capital city of Sydney are likely to be accounted for by investors.
In other words, as we've long predicted, Sydney is now a maturing property market where prices will become exceptionally expensive in the inner- and middle ring suburbs as investors squabble over a limited volume of existing stock, and home ownership levels in those locations will ultimately recede.
But much cooler elsewhere...
By way of contrast, note what is happening (or more accurately, note what has not been happening) to investor loans in South Australia.
Despite the lowest interest rates in a generation, the rolling annual value of investment lending is below where it was in 2007, helping to explain why capital growth in Adelaide has been comparatively very poor.
There is very soft demand evident from investors, jobs growth is negative and has been for some years, and the state's population growth is weak.
A hotspot, 'tis not (click chart):