Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), & CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 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's one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete 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 & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - author of Things That Make You Go Hmmm, one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, 'MacroBusiness'.

Sunday, 17 July 2016

Lending finance slowing

Lending finance slows

The ABS Lending Finance figures for May showed total lending trending down, driven by weaker commercial finance. 

Personal finance lending was up in the month, but has been generally soft in recent times, having barely increased for a dozen years.

Perhaps this is not that surprising given extraordinarily low mortgage rates, and and in an era where the record use of mortgage offsets and redraw probably aren't captured with any clarity in these figures.

Owner-occupier housing finance growth including alterations and additions (major renovations work) had previously been strong, and remains higher over the year, but the trend has softened recently as lending and serviceability restrictions have made it more difficult for borrowers to secure access to credit. 

Commercial finance had also previously been responding to low borrowing rates, but there has been a notable recent drop-off in lending to the construction sector.

Domestic commercial lending to the mining sector was never really a major player, with resources projects often funded through equity rather than debt.

Nevertheless as a worthy indicator it is worth noting that resources investment is in total disarray, with annual commercial lending to the mining sector having imploded, down by more than half in the last year. 

Although mining investment is obviously weak, the recent weakness in total commercial finance has actually been reflected across most states and territories.

Property investor loans

The ABS classifies property investor loans as "commercial finance", and this sub-set of lending finance has seen activity pull back since APRA insisted upon the introduction a range of macro-prudential measures in 2015.

Although not yet evident in the annual figures, the May result revealed a substantial rebound in New South Wales (i.e. mainly Sydney) investor loans, all the way back up to above $5.5 billion. 

Although this figure remains well below the rip-snorting $6.3 billion seen a year ago, it represents a very significant increase of more than a third over the past three months. 

Indeed, investor lending was generally a little stronger in May than it was in the preceding months - even in the Top End! - but is still well down from the cyclical peaks.

The wrap

Overall, although the monthly data is volatile commercial lending has fallen by a fifth over the past year, which is not a bullish indicator for the economy.

Lending for mining investment has completely collapsed, but some other industries look to be faring reasonably well.

Bill Evans of Westpac forecasts that the Reserve Bank will cut interest rates by 25 basis points to a record low of 1.50 per cent at its meeting on August 2. 

However, with the reasonable outlook for growth and the unemployment rate, Evans believes this will be the low point for the interest rate cycle.