Investment property lending reaches record $153.5b in year to June

Australian banks lent a record $153.5 billion to investors in the year to June as cheap debt and the fast-rising housing market drew boosted demand for credit.

Investment loans rose nearly 25 per cent on the 2014 figure of $123.3bn, Australian Bureau of Statistics figures on Friday showed.

There were signs, however, that growth in lending has peaked.

Property investor lending eased back for a second month in June, to $13.5bn from $13.6bn in May, pulling the monthly total further back from the April record of $14.1bn.

A slow build: lending to first home buyers rose at its slowest pace in over 3 years in the year to June. Rob Homer

On an annualised basis, the June figure also showed a slowdown, with the increase of 22.5 per cent from June a year earlier, also down from the 29.7 per cent growth rate posted in April.

The figures sparked a quick response from the lending industry, who warned of dangers from regulator APRA-led push to reign in investor lending growth.

“A lot of lenders are making a lot of changes at the moment, and this will no doubt serve to keep some potential investors on the sidelines,” said John Flavell, the chief executive of broker Mortgage Choice. “Unfortunately, the people these changes are affecting are the mum-and-dad investors and first time buyers who are choosing to purchase investment properties before owner-occupied properties.”

While signs of a slowdown will be welcome news to regulators, there is little sign yet that first-home buyers are finding it easier.

In the year to June, the value of loans to first home buyers totalled $331.1bn, up just 2.2 per cent from the previous year. It was the slowest annualised rate of growth in first-home buyer loans since February 2012, when the total fell almost 1 per cent.

The full effect of tighter curbs on investor credit will still take some time to show up in the official figures, ANZ economists Daniel Gradwell and Justin Fabo said in a research note published after the figures.

“The full impact of these and other changes to dampen investor housing lending are likely to take some time to flow through,” they said. “Although investor demand is expected to remain solid, APRA’s 10 per cent growth ‘speed limit’ on investor housing lending should see only modest growth in investor housing loan approvals over the second half of the year.”

Earlier this week Morgan Stanley also said there was a risk that the investment lending curbs, along with separate moves to curb residential investment by wealthy foreigners through the Significant Investor Visa scheme could be ‘too successful’ and could crimp the housing market.

SOURCE: The Australian Financial Review
AUTHOR: Michael Bleby
PUBLISHED: Friday, 7th August 2015

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The Australian Financial Review
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Investment property lending reaches record $153.5b in year to June
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