Owner occupier lending down as investor lending rises

According to the latest housing finance data for August 2016, released by the Australian Bureau of Statistics (ABS), the number of housing finance commitments was down, but the value of investor lending is up.

Over the month of August, there was approximately $31.4 billion worth of housing finance commitments. This was -1.0% lower over the month, whilst -5.1% lower than at its peak in April 2015.

Owner occupiers still make up the largest proportion of housing finance commitments, with a share of $19.5 billion. Investors have a share of $11.9 billion from the total $31.4 billion. In spite of owner occupiers having a greater share, the last two consecutive months have seen the value of lending to owner occupiers fall, whilst for investors, this is the fourth consecutive month that lending has risen.

Compared to its December 2015 peak, the value of lending to owner occupiers is down by -8.6%. Even though investor lending is well below its April 2015 peak, down -18.5%, the recent rebound has seen the value of investor lending increase by 10.0% from its recent trough in April 2016.

Owner Occupier Lending

Out of the $19.5 billion worth of mortgage borrowing by owner occupiers;
  • $10.2 billion for purchase of established dwellings
  • $6.4 billion for refinancing of established dwellings
  • $1.8 billion for dwelling construction
  • $1.0 billion for purchase of new dwellings
Both the purchase and refinancing of established dwellings have trended lower over recent months. Refinancing lending is now -13.4% lower compared to its peak of $7.4 billion in December 2015. The purchasing of established dwellings is -11.2% lower than its September 2015 peak of $11.5 billion. However, it is expected that refinance activity will grow in the upcoming months, due to the full interest cut not being passed on in full by the majority of lenders in August.

Property Investor Lending

Out of the $11.9 billion worth of mortgage lending in August 2016 for property investors,
  • $11.1 billion was for established housing
  • $0.9 billion in lending for construction
Since September 2015, the value of lending for construction was at its lowest level. It has also fallen by -49.5% since its March 2016 peak which saw the value of lending for construction at $1.7 billion. The $11.1 billion for established housing however has increased over the past four months and is now sitting at its highest level since August 2015.

Another factor pushing up investor mortgage lending is housing credit data. Monthly housing credit data for investors has now increased monthly over each of the five months to August 2016.

New Construction

So what about new construction? The value of new construction lending is now currently at its lowest level since September 2015. New construction, which includes owner occupier construction of dwellings, owner occupier purchase of new dwellings and investor lending for construction, comprises a value of $3.7 billion. Out of this $3.7 billion, investor lending only made up 23.1%. Lending for new housing has also gradually trended lower since March 2016.

This data shows that only 14.9% of the total value of housing finance commitments in August 2016 were for new housing. 

Current Trends

The current trends are showing that the demand from owner occupiers is slowing, whilst investor demand is starting to increase. However, bear in mind that even though investor demand is starting to increase again, it is unlikely that it will reach the heightened levels that was seen earlier on in the property cycle.

The slowing demand for owner occupier lending suggests that many have already made upgrades and improvements to their home or downsized to something smaller. In Sydney and Melbourne, it is also becoming more expensive to move when you consider the high transaction costs, such as stamp duty on a new home or the agent commission involved when selling or looking for a new home. Because of this, many owner occupiers are simply staying put for the time being or choosing to renovate instead, as a more affordable alternative to moving.

The start of Spring has also seen the number of housing market listings increase, alongside a higher clearance rate. People are still considering selling and buying in this ripe market and investor lending is certainly making a comeback.

If Sydney and Melbourne are proving far too expensive for you to buy in, then Brisbane is one city not to be overlooked for property investors. To find out more about the current property markets for Sydney, Melbourne and Brisbane, and what property opportunities could suit you, give the iBuyNew team a call today to learn more.

Call us today on 1300 123 463.
Published on 11th of November 2016 by Marty Stanowich
Marty Stanowich
Marty Stanowich

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