The ABS data on housing finance today suggests that the momentum in housing is shifting, as the tighter restrictions on investment lending bites; this despite strong market demand and the fact that investor property finance has never been higher at 38.9%. Looking at the monthly flow trend data, lending overall rose 0.52% in the month, by $169 m. Within that, monthly approvals data shows that owner occupied lending rose 0.84% (up $105 m from last months approvals), refinancing up 0.72% ($44 m) and Investment lending up 0.14% ($19 m). In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 1.5%.
Within these numbers, we see that owner occupied construction fell 1% compared with last month, owner occupied new property purchases rose 2.24%, owner occupied refinance rose 0.72% and owner occupied “other” purchases rose 1%. On the investment side of the equation, investment purchases by individuals fell 0.47%, whilst investment construction rose 4.3% and investment by other entities (including SMSFs) rose 2%. Still momentum, but the investment sectors is shifting. We expect to see ongoing strong demand from the SMSF sector.
Looking at first time buyers, both the original data from the ABS, shows a small fall in the month to 15.4% in July 2015 from 15.8% in June 2015, and the DFA data for investor FTB also fell. The number of first time buyers are still sitting at around 12,000 a month in total, still well below the peaks in 2009. Our surveys indicate strong FTB investor appetite. The changed underwriting requirements however are having an impact.
Looking at the loan stock data, the major banks still have the lion’s share, but we see that on the investment side, credit unions grew their books the largest in percentage terms, with a 1.1% rise in investment loans (compared with a rise of 0.52% by the banks and 0.68% for the building societies). We suspect some investors are switching to smaller banks, credit unions and the non-bank sector when they find the larger players less willing to lend. Overall growth on the owner occupied side was 0.43%.
Finally, looking at the overall stock of loans, we see that investment loans now make up a record 38.9% of the total portfolio, thanks partly to the recent restatement of loan types by some the banks. We think this is too-higher share of housing lending (it is more risky in a down-turn) and the banks 60% total loan portfolio in housing is also too high, sucking finance from business sectors which might contribute to real economic growth.
