Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 11 November 2016

Investor lending steps up a gear

Judgement Day

Like the liquid metal T-1000 from Terminator 2, those slippery property investors just keep on coming back for more.

The Housing Finance figures for the month of September 2016 revealed a sizeable seasonally adjusted +4.6 per cent leap for investor loans to $12.4 billion. 

In this era of shameless clickbaitery it's forever tempting to make a huge deal out of every such move - and this jump may yet prove to be significant - but you have to remember that month to month figures will always bob around a bit.

That's just the way to is. 

The best way to see beyond the hyperbole (and indeed the hyber-bowl) is to look at the smoother trend figures.

The trend series shows that investor lending fell quite sharply last year from an unprecedented monthly peak of above $14 billion to around $11 billion following the introduction of speed-limits by the regulator.

However, investor lending has steadily increased again throughout 2016 to its present level of $12.4 billion (with the trend series up to $12.2 billion so far).

It's not yet clear at what level alarm bells start to be sounded again, but for the time being total housing finance of $32.3 billion remains below its 2015 peak.

You can click on these charts to make them bigger by the way. 

One of the most notable features of this stage of the housing market cycle has been that in the key auction markets fewer homes are being sold, albeit mostly at higher prices, as prospective sellers pull up the ladder on would-be homeowners.

There are several drivers for this, but whatever their respective merits the net result has been fewer homebuyer commitments per month. 

State versus state

You can see the decline in the number of homebuyer commitments clearly flowing through from Sydney and Melbourne, while volumes are down in Perth too for a different reason (there being fewer willing buyers in a declining market).

The monthly dollar value of owner-occupier commitments shows that Queensland, South Australia, and Tasmania are shaping up as steadily strengthening markets for homebuyers.

In Sydney and to a lesser extent Melbourne investors are surging back with a vengeance. I'll look at the investor sector in more detail on Monday next.

Gearing up

Are prices really rising? 

In short, yes, and you can see the impact of this in the average loan size, which has crept back all the way back up to $367,600, although this remains below the record high seen in November 2015. 

At $324,300 first homebuyers are also getting perilously close to once again breaking records for their average loan sizes. 

The monthly figures for first homebuyers are a little volatile at the state level, but smoothing the figures on a 3mMA basis confirm that entry prices have popped higher in Tasmania following a decade of stagnation. 

The other state which has seen a significant increase in average first homebuyer loan sizes over the past year is Queensland, rising by 4 per cent to $308,700. 

The wrap

The number of homebuyer commitments has declined in line with sales volumes, yet the value of investor lending has been trending up throughout 2016 to date.

I'll take a look at the investor lending figures in more detail and by state and territory on Monday.

Overall, with loan sizes also increasing again, it looks as though dwelling prices will finish 2016 on a strong note.