Monthly Banking Stats – Page 12 – Digital Finance Analytics (DFA) Blog

Over 50% Investment Loans In September

The latest ABS housing finance data to September 2014 has just been released. We broke more records, as more than half the loans written, excluding refinance, were for investment purposes.

First time buyers continue to languish, especially in the hot Sydney market. Further evidence of the market being out of kilter, per the RBA’s recent comments. In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 2.3%.

In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 12.0% in September 2014 from 11.8% in August 2014. Still near the lowest on record.

NSW first time buyers continues at the lowest levels, though with a slight uplift this month. WA data flatters the Australia-wide averages for first time buyer finance. It is not just a Sydney thing.

In trend terms, the number of commitments for owner occupied housing finance fell 0.2% in September 2014. In trend terms, the number of commitments for the purchase of established dwellings fell 0.3%, while the number of commitments for the purchase of new dwellings rose 1.2% and the number of commitments for the construction of dwellings rose 0.2%.

Total Housing Lending Now Worth $1.4 Trillion

The RBA financial aggregates, released today, highlight the continued growth in housing lending. The overall summary is shown below:

Looking in detail at the housing numbers, owner occupied lending reached $923.1 billion (up 0.46% from the previous month, or $4.2 billion), whereas investment lending reached $475.1 billion (up 0.85% or $4.0 billion). Investment loans now comprise 33.98% of total housing lending, another record. This underscores RBA’s concerns as we highlighted before.

Total housing lending is now $1.398 trillion, of which, according to APRA $1.288 trillion is from the ADI’s, the balance of $110 billion is from the non-bank sector, and recorded no change (though there are some data issues here).

Monthly Banking Statistics For September Shows Investment Loans Still Running

APRA just released their data for September 2014. This provides a breakdown of balances outstanding by financial institution across the main lines of business. This only includes players within their bailiwick.

Looking at home loans first, total balances rose from $1.28 to $1.288 trillion, with investment loans rising by 0.85% to $446.3 billion, and owner occupied loans by 0.44% to $841.1 billion. So investment lending forged ahead, again.

Looking at the relative shares, we see CBA with 27.2% of the owner occupied market, and Westpac with 31.9% of the investment home loan market. Together the two Sydney-based players dominate.

We see that Bank of Queensland and Westpac have relatively the largest share of investment loans in their loan portfolios.

Looking at the month on month movements, we see the most significant movements in investment loans at Westpac and CBA. We also see Macquarie active on the investment loan front, wth a growth of 3.8% month on month, they grew their investment book the fastest. Macquarie also grew their owner occupied loan portfolio the fastest, at 2.7%.

Turning to deposits, total balances were up 1.03% month on month, to a total of $1.77 trillion. Looking at the individual players, CBA and WBC have dominant positions.

In relative terms, HSBC (3.2%) and CBA (2.3%) grew balances the fastest, Bank of Queensland and Rabobank both lost balances.

Switching to Credit Cards, balances fell slightly in the month, at $40.2 billion. There is little change in the individual portfolios amongst the big four and Citigroup.

The Unhappy State Of Investment Property

In the ABS data yesterday there was useful information on the state by state situation with regard to investment property lending. So today we look at the latest data, and it is quite shocking. The chart below shows the 6 month rolling average value of lending for property investment flows across the major states. It is the sum of lending for dwelling construction, and borrowing for established homes by individuals, and others. This is not seasonally adjusted, so it is original data. The most striking observation is the breakout in NSW, and to a lesser extend VIC. There is much more modest growth in the other states. No wonder then the RBA has been starting to warn.

But if we look by percentage splits, its is even more stark. In 2008, 32% of investment lending was in NSW, the most recent data puts it at 45%. In VIC, in 2008, it was 26%, today its still 26%. Compare this with QLD, where in 2008, it accounted for 23% of investment lending, whereas today it has dropped to 14.5%; WA also dropped a little. Combined, VIC and NSW comprise 71% of all investment lending – talk about concentration risks!

There is a strong correlation with buoyant investment activity and house prices of course, and this raises a significant question for the regulators, if macroprudential is brought in, can it be done in a way to target the investment sector without causing unintended consequences, and if investment is slowed in NSW, what does that say about the prospects for house prices in coming months. It is indeed an unhappy state of play.

August Lending Data Released

The ABS released their data series for August covering the entire lending spectrum (the housing details were released previously).

The total value of owner occupied housing commitments excluding alterations and additions fell 0.1% in trend terms, and the seasonally adjusted series fell 2.0%.

The trend series for the value of total personal finance commitments rose 1.0%. Fixed lending commitments rose 1.0% and revolving credit commitments rose 0.9%. The seasonally adjusted series for the value of total personal finance commitments rose 5.2%. Revolving credit commitments rose 5.9% and fixed lending commitments rose 4.7% .

The trend series for the value of total commercial finance commitments rose 0.2%. Revolving credit commitments rose 0.4% and fixed lending commitments rose 0.1%. The seasonally adjusted series for the value of total commercial finance commitments fell 16.3% in August 2014, after a rise of 3.4% in July 2014. Fixed lending commitments fell 18.6%, after a rise of 21.0% in the previous month. Revolving credit commitments fell 9.6%, following a fall of 26.8% in the previous month.

The trend series for the value of total lease finance commitments rose 1.1% in August 2014 and the seasonally adjusted series rose 8.7%, after a fall of 7.3% in July 2014.

This chart shows the seasonally adjusted flows for all finance categories.

Looking at property, we again see the investment lending sector strong, at close to 50% of all property lending, excluding refinancing.

Finally, we look at the share of investment lending as a proportion of all commercial lending. We see it sits above 20%, with a surge recently. The dynamics here are interesting, does if represent a fall in other business lending categories, or a replacement by rising investment property lending?

The other gap in the data is the number of new properties purchased as investment properties (this is different from investing in building new property). This is an important data point because one of the arguments proffered by some is that negative gearing supports new builds. Our own survey data suggests this is not the case, and most investment lending which is negative geared is going to established property.

Total Housing Lending Hits Another High At $1.39 Trillion – RBA

The monthly Financial Aggregates from the RBA for August are out, and shows yet another growth in housing lending. Total housing credit grew at an annual 6.7%, business credit at 3.2% and personal credit 1.1%. Total housing was $1.39 trillion, and now represents 60.7% of all bank lending, the highest it has ever been. In 1990, housing lending was 23% of all bank lending. The red area chart shows the relative proportion of housing lending, compared with all lending. The difference between the APRA number of $1.28 trillion represents the non-bank sector.

Here is the lending mix data right back to 1990 showing the proportion of the banks books in housing finance, as a total of all lending.

Looking at the mix of housing loans, investment lending makes up 33.9% of all housing lending, it has never been higher. Owner occupied lending was worth $919 billion, and investment lending, $471 billion. These are all seasonally adjusted numbers. The red area chart shows the relative proportion of investment housing lending, compared with all housing lending.

Looking at the relative growth, we see that investment lending grew 0.8% last month, whilst owner occupied loans grew 0.4%, seasonally adjusted.

The 12 month averages, which smooth some of the noise in the data shows strong investment growth, at 9.2%, the strongest for several years, (the all time high was in the credit fueled heights of 2003. when it reach more than 25%). Owner occupied growth was slower at 5.4%, but still the strongest since 2012.

Looking at business lending, we see it falling as a proportion of all lending, to 33%, and worth $760 billion. The red area chart shows the relative proportion of business lending, compared with all lending.

Personal credit (other than housing) fell to 6% of all lending, and worth $142 billion. The red area chart shows the relative proportion of other personal lending, compared with all lending.

Our banks are more and more reliant on housing lending, raising questions about concentration risks, should housing take a negative turn. We encourage the FSI to consider seriously the steps needed to re-balance the equation.

Deja Vu Housing Data For August From APRA

APRA published their monthly banking statistics for August 2014 today. The trend remains set, with investment lending running ahead of owner occupied lending. Further evidence that the RBA should react to the hot market. Total lending was up by $7.4 billion to a total of $1.28 trillion. Owner Occupied loans grew at 0.48% from last month, whilst investment loans grew at 0.78%. 65.4% of loans were for owner occupation, the rest investment. This data excludes the non-bank sector, which will be reported separately.

Looking at the bank specific data, Westpac leads the way on Investment Loans, with CBA continuing to grow its relative share of investment lending. Should the rules of the game change, thanks to RBA intervention, then WBC and CBA (the Sydney based banks) are likely to feel the heat more than the others. Competition amongst the big players is hot, with significant discounts and special offers available to lure prospective borrowers. Lending growth is still well behind property price rises in most centres.

In terms of relative market share, WBC has 32% of all Investment loans, and CBA 26.9%. On the Owner Occupied loans, CBA has 27.2% of the market and WBC 21.4%.

Looking at portfolio movements, in the past month, WBC has been lending the most, note also Macquarie is active as it continues its strategy to grow its retail business.

Another way to look at this growth pattern is by month on month percentage movements. Relatively, Macquarie is the most aggressive, followed by AMP bank.

Turning to the other data in the statistics, on the deposit side, balances grew by 0.75%, to $1.749 trillion. This is a slowing from the previous 1.02%, perhaps reflecting falls in average deposit rates relative to other investments.

In terms of monthly movements, nab has been the most aggressive amongst the larger banks, together with HSBC from the smaller players. Relatively speaking, Suncorp, Rabobank and Bendigo went backwards.

Looking at relative shares, CBA has 24.2%, WBC 21.0% and nab 17.6%. This chart highlights the concentration in the big four, with a combined 78.4% of all deposits. With deposits backed by the government guarantee, these might be viewed as government back funds, and this helps to prop up the credit ratings of the major players. The Australian Government has guaranteed deposits up to $250,000 in Authorised Deposit-taking Institutions at the moment. There is a case to review this, and we wonder if the FSI report, due soon will mention it.

Finally, Cards. The balances on cards are at $40 billion, just $130m up from last month.

CBA has 27.9% of the market, Westpac 22.9% and ANZ, 19.6%. The big four have combined 84%, and with Citigroup’s 10%, the five have close to 95%.

So, in summary, deja vu. Hot investment lending, industry concentration, and large deposit balances guaranteed.

Strong Investment Lending In Latest Finance Data

In the final element of the monthly series, the ABS today released their lending data for July. The total value of owner occupied housing commitments excluding alterations and additions rose 0.3% in trend terms and the seasonally adjusted series was flat. The trend series for the value of total personal finance commitments rose 0.4%. Revolving credit commitments rose 0.8% and fixed lending commitments rose 0.1%. The seasonally adjusted series for the value of total personal finance commitments fell 1.3%.

Revolving credit commitments fell 4.7%, while fixed lending commitments rose 1.5%. The trend series for the value of total commercial finance commitments rose 2.7%. Revolving credit commitments rose 5.1% and fixed lending commitments rose 1.6%. The seasonally adjusted series for the value of total commercial finance commitments rose 3.7% in July 2014, following a rise of 11.8% in June 2014. Fixed lending commitments rose 20.7%, following a rise of 0.8% in the previous month. Revolving credit commitments fell 25.9%, after a rise of 37.7% in the previous month. Looking at the data in more detail, we see the concentration of lending by the banks (and mainly the big four).

Within the commercial category, lending for housing investment by individuals was a significant element. Here is the absolute dollar amount by states, with a trend line, showing the relative strength in lending for investment purposes in NSW in particular, then VIC. The investment lending boom is not uniformly spread across the country. Another way to look at the data is on a per capita basis across each state. This chart shows the average amount per capita between January 2011 and July 2014. The movement is NSW in particular since May 2013 highlights both the volume and size of the average loans for investment purposes in NSW, compared with the other states. It is also worth noting the differences between NSW and some of the other states, especially TAS and SA, and we see WA, NT and VIC roughly marching together, behind the rabid pace set by NSW.

Investment Lending Blows Its Stack

The ABS today released their home lending data to July 2014, which held a number of surprises. The trend estimate for the total value of dwelling finance commitments excluding alterations and additions rose 0.6%. In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 2.7%. In trend terms, the number of commitments for owner occupied housing finance was flat in July 2014. In trend terms, the number of commitments for the purchase of new dwellings rose 1.3%, the number of commitments for the purchase of established dwellings fell 0.1% and the number of commitments for the construction of dwellings fell 0.1%

The state variations in percentage movements of owner occupied lending are worth a quick look. Owner Occupied lending is slowing faster than many predicted, rising only 0.3%.

Most Owner Occupied transactions were for the purchase of established dwellings, though the uplift in construction and the purchase of new dwellings can be seen in the data.

Refinance accounted for a fair chunk of this, as borrowers look to churn into low rates, which probably at the bottom of the cycle.

But the strength of investment housing commitments, which rose 1.2% in the month is pretty amazing.

Looking in more detail, we see that 40% of loans in the month of July were for investment purposes if we include Owner Occupied refinance in the total OO data.

However, if you exclude refinance of existing loans, then a staggering 50% (rounded up) were for investment purposes. This is an absolute record, and represents a 4% uplift from last month. We predicted this uplift in our surveys, highlighting the second wind we saw coming through from investors. The attraction of lifting house prices and low interest rates make property investment for many compelling.

The story for first time buyers is just as concerning, but in the other direction. In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 12.2% in July 2014 from 13.2% in June 2014.

Again, we need to look at the state data to see whats going on. In NSW, VIC and QLD, the first time buyer percentage of all loans written in the month is rock bottom, in NSW it is sitting at 7%, compared with a peak of 27% in 2011. WA continues to show the most momentum in first time buyers thanks to high migration, then TAS (where there are specific incentives) and SA.

But if you take the average of the slower states and faster states, we see a very stark contrast in the share of first time buyer lending.

This data again highlights the risks in the market, younger buyers excluded, masses of investment loans being written which inflate the banks balance sheets, and increases the exposure of households and banks to the heady current prices, which as we have already highlighted are high on any measure you care to look at. There may be a slight feel good factor for investing households, but we wonder about the sustainability of property at these levels.