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Home loan lending defies slowing property market

Home loan lending defies slowing property market

Home loan approvals are up despite downturns in capital growth, rental yields and building construction, ABS figures confirm.

Home loan approvals were up in December in a sign property lending is defying the downturns being seen in value growth, rental yields and building construction.

The latest Australian Bureau of Statistics (ABS) figures indicate the number of home loans issued to owner-occupiers in the final month of 2015 went up 2.6% in seasonally adjusted terms to 58,552 – a six-year high, according to the Housing Industry Association (HIA), and only just short of analysts’ forecast of 3%.

But lending to property investors continues to track lower, down to $11.6bn in December from the April 2015 peak of $14bn.

John Peters, senior economist with CBA, argues "the RBA/APRA macro prudential policy measure changes have had the desired impact of dampening down investor lending and activity". 

Lending to first home buyers (FHB) is also in decline. Where a year ago FHBs made up 16.6% of all loans to owner-occupiers, in December they only accounted for 15.1%. 

"The FHBs are well down on their long-run market share near 18.3%," said Peters. "They could remain there until the housing market weakens and buyers gain more market power than sellers."

He added: "There are early signs that this may be starting in the outer suburbs of the capital cities."

The ABS released its December figures on the same day Reserve Bank (RBA) Governor Glenn Stevens, addressing federal parliament, confirmed the central bank would likely maintain its conditional easing bias and argued a slowdown in Sydney and Melbourne property prices would be “quite welcome”.

CoreLogic RP Data reports Sydney dwelling prices fell 2.1% during the quarter to 31 January and were flat in Melbourne over the same period.

Rental growth is also the slowest on record, according to CoreLogic, while the latest ABS figures indicate an ongoing decline in new residential building approvals.

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This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.