Investor Lending Continues To Cool. Lending To Owner Occupiers Nearing The Peak?

The ABS has released housing finance figures suggesting that investor lending in the housing market has passed its peak, with lending activity among owner occupiers showing only marginal growth in October, according to the Housing Industry Association.

“Lending to investors declined for a sixth consecutive month in October, this time by 6.1 per cent to be worth $11.5 billion,” said HIA economist Diwa Hopkins.

“The monthly decline was driven by investors in the established housing market. In contrast, lending to investors in new housing partially recovered previous monthly falls, although the latest level is still below previous peaks.”

The value of lending to investors in the established housing market declined by 8.7 per cent in the month of October, while the value of lending to investors in the new housing market jumped by 50.6 per cent, following declines in the order of 20 per cent in both August and September.

“Lending activity among owner occupiers remained strong in October, although with mortgage interest rate hikes having taken effect in November, we could see this situation change in the months ahead. The next update to housing finance will provide the very first glimpse of the impact that this change in credit conditions is having," Ms Hopkins said.

“While interest rates remain low, the second half of 2015 has seen credit conditions become tighter and the early indications are that residential construction – a key source of support for the broader domestic economy – will be affected.”

Six out of the eight states and territories saw the number of loans to owner occupiers purchasing or constructing new homes decline in October 2015 when compared with October 2014: Tasmania (-28.6 per cent); Western Australia (-24.5 per cent); Australian Capital Territory (-20.9 per cent); Queensland (- 9.2 per cent); Victoria (-6.0 per cent); and South Australia (-2.5 per cent). New home lending to owner occupiers increased by 7.8 per cent in New South Wales and was unchanged in the Northern Territory over this period.