Australian Home Loans Investor Lending on the Rise

The Australian housing market dampened in the month of August, with the fall in home loans and the much slower rise in residential lending. Data from the statistics bureau showed on Tuesday that there was a slump in home loans for the second straight month in August and the third in 4 months. Home loans issued by Australian authorities experienced a decline of 3% in terms of seasonal adjustments in the month of August, following a downward revised 4.5% slump from the previous month that was also the biggest since January. A decrease of 1.3% was also projected by a median estimate of economist. Official data showed that investor loans edged higher by 0.1%, after investment lending for homes rose by 0.5% in the previous month.

Westpac chief economist Bill Evans said, “The numbers underscore the uneven conditions in Australia's housing markets, which are weak in terms of finance activity and turnover but firming according to other, more timely, indicators such as auction clearance rates and some price measures”.

The housing finance approvals figures should exclude loans to non-residents and so should be unaffected by recent moves by banks to cut back lending to this segment. But there have been problems with how the loans are classified.

"Hence it is possible that these changes have impacted," Mr. Evans said.

The value of housing finance approvals, including loans to investors as well as owner-occupiers, has also fallen, to $31.413 billion. That's one per cent down on July and at its lowest level since April, seasonally adjusted Australian Bureau of Statistics data show.

The acceleration in investor credit mirrors the findings of a survey conducted by UBS which found the proportion of properties being purchased for investment purposes increased in 2016 compared to the levels of a year earlier.

The ABS does not release data on the number of loans issued to investors as part of this release. Adding the value of investor and owner-occupier lending together, total housing finance stood at $31.413 billion in August, the lowest monthly total since April. In August 2015, one year ago, this figure stood at $33.045 billion. In original terms, the value of outstanding housing loans in Australia rose to $1.524 trillion in August. The value of loans to owner-occupiers is currently $987.054 billion while those to investors now stands at $536.729 billion.

According to the ABS’ residential property price index for the June quarter, the value of Australia’s housing stock currently stands at $6.045 trillion.