The ABS released the Lending Finance data for March 2015 today. Comparing March with February, Housing for owner occupation excluding alterations and additions rose 0.8% in trend terms, and the seasonally adjusted series rose 1.6%. The trend series for the value of total personal finance commitments rose 0.3% although the seasonally adjusted series fell 0.9%. The trend series for the value of total commercial finance commitments rose 2.0% whilst the seasonally adjusted series rose 0.4%. The trend series for the value of total lease finance commitments rose 1.4% in March 2015 and the seasonally adjusted series rose 3.0%, following a rise of 3.6% in February 2015.
Looking at all lending, 43% was for residential property – including investment property loans, and we see a slight downward drift, as lending for other business purposed improved a little.
Looking at all commercial lending (fixed and revolving), we see that 28.8% was for residential investment property purchases, down from a high of 29.9% at the end of last year. This again shows that non-residential property lending to business lifted a little, and could suggest investment lending growth may be slowing a tad. However, investment lending remains at unprecedented levels.
To reinforce this view, we can compare the proportion of all commercial fixed term loans to those relating to housing investment.
The point we make again is that lending for investment property, whilst inflating house prices and bank balance sheets is unproductive. We need more lending to productive businesses to sustain growth, but the banks are finding it easier and more profitable to extend credit to investors, thanks to lower loss experience and capital benefits. This continues to be a significant structural problem, which needs to be addressed.
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