Credit Crunch Bites In May

APRA and the RBA released their May loan numbers yesterday. These are stock numbers, taking account of repayments, refinances and new loans.  APRA said that banks increased their overall residential property lending by 0.24%, with owner occupied loans up 0.51% and investor loans down again, this time 0.24%.

As result the proportion of loans for investment purposes dropped back to 36.3%. Total loans were 1.758 trillion dollars.

Within the individual lenders, Westpac dropped their investment portfolios, more than NAB, Macquarie and CBA, while ANZ expanded both investment and owner-occupied loans, as did Bendigo and Adelaide Bank and Bank of Queensland. Suncorp, Citigroup, and Members Equity Bank all reported lower balances to APRA this month.

Turning to the RBA series, which includes the non-bank sector, Credit to the private sector contracted in the month of May, the first decline in credit since June 2011.Demand for credit has weakened across across businesses and households.

The RBA reported that the May decline in total credit of 0.1% included: a 1.2% contraction in personal; a 0.6% fall in business; and a weak 0.24% rise in housing (with the investor segment in decline).

Businesses are in survival mode now, having initially pulled down available credit lines, which led to a March spike of 3.1%, the largest monthly increase in business credit since the start of 1988.

Now they are moving into cut mode with expenditure and investment both slowing. We expect this to continue, along with more structural job cuts.

Personal household credit which makes up around 8% of total household credit fell, as confidence ebbs away. The temporary “lock-down” also impacted. In fact in the past 12 months personal credit is down more than 10%.

Overall housing credit was up 0.22% in April and by 0.24% in May, which translates into an annulaised 2.8%. It continues to weaken. Of course this is a function of confidence, off the back of COVID, plus rising underemployment, Investor Housing credit dropped  -0.25% over the month, and down -0.8% across the year for May. Our research suggests many property investors are coming unglued as home prices fall and rents get crushed. Owner Occupied credit grew, up 0.49% over the month, or 5.4% annualised.

So to me the question will be the ongoing impact of underemployment, and the impact of the cliff, depending of what the banks do (will they continue to postpone repayments) and the shape of future government support, to say nothing of the passage of the virus.

Final Reminder – DFA Live 8pm Tonight With Damien Klassen From Nucleus Wealth

The end of the financial year is a perfect time to think about investment strategy, especially given the current health and economic uncertainties. Are the financial markets set for a fall, or will they rise further given Central Bank stimulus? Join the discussion tonight at 8PM Sydney and ask a question via the YouTube Chat.

Into The Property Matrix – With Veronica Morgan

Property Expert Veronica Morgan joins me for a discussion on the complexity of the property markets at the moment.

Veronica is a Sydney-based property expert, buyer’s agent and principal of Good Deeds Property Buyers. She writes on a wide variety of property topics and is the co-host of Location Location Location Australia.

My recent show on Real Estate Talk with Veronica: https://realestatetalk.com.au/doomsayer-explains-his-theory-regional-bonanza/

Veronica’s book offer: https://gooddeeds.com.au/auction-ready/ – use discount code DFA.

Our live DFA show is scheduled for Tuesday 14th July 20:00

Auction Results 27 June 2020

Domain released their preliminary result for today. Volumes are coming back to more “pre-COVID” levels but clearance rates are lower…

Canberra listed 24 auctions, reported 20 and sold 16 with 4 passed in to give a Domain clearance of 80%.

Brisbane listed 52 auctions, reported 26 and sold 15 with 4 withdrawn and 11 passed in to give a Domain clearance of 50%.

Adelaide listed 24 auctions, reported 9 with 6 sold, 1 withdrawn and 3 passed in to give a Domain clearance of 60%.

A Bear Goes Into The Dragon’s Den

This week I recorded an interview with The Elephant In The Room’s Veronica Morgan for Real Estate Talk, slated as “your trusted voice in property investment. Australia’s most respected real estate investing experts give tips on wealth creation”.

Importantly, we got to the heart of the property issue, and found much common ground. I may have diluted the perception of being an outright property “bear” but perhaps we underscored the realities in the markets at the movement. And yes, property is still overvalued against long term fundamentals by ~40%.

https://realestatetalk.com.au/doomsayer-explains-his-theory-regional-bonanza/

This week Veronica Morgan catches up with a self-confessed property bear whose message has been largely misunderstood. Martin North explains his thoughts about property investing in a fascinating 2 part interview. Simon Pressley and Cate Bakos talk about why many regional locations are exhibiting firm demand and as a follow on to that story, Kevin Turner asks Miriam Sandkuhler why buying in regional areas. But first Veronica is hot on the trail of a story of particular interest to people with pets in strata with strata layer Amanda Farmer.

When Is A Rate Not THE Rate? – With Steve Mickenbecker

I discuss mortgage rates with Canstar’s Steve Mickenbecker, and how its possible to save thousands of dollars over the life of a mortgage. We discuss the “apathy tax” and what we can do about it!

https://www.canstar.com.au/author/steve-mickenbecker/