Helping Time-Poor Investors: Housing finance falls in September

It’s working!

APRA’s macro prudential controls are slowing down our property markets by creating an old fashioned “credit squeeze.”

Housing finance commitments in September recorded the largest decline in two years, and falling auction results suggest the market has further to cool through the remainder of 2017 and into 2018.

Anz 1

In a recent commentary on these finance figures ANZ Bank said:

We believe the regulator/RBA and state governments will be encouraged by the slowdown in investor borrowing and improved access to the housing market for first home buyers, respectively. RBA

The value of housing finance commitments fell sharply in September, with a 4% m/m decline reflecting the weakest monthly result since this time in 2015. The weakness was spread across all segments – first home buyers, owner occupiers and investors alike.
Within this negative headline number there are a few encouraging results on the policy front. Finance commitments to investors are now 6% lower than a year ago, which is a rapid deceleration from the peak of nearly 30% y/y growth in January this year. APRA’s macroprudential policy, aimed at investors and interest-only loans in particular, appears to be having the desired effect of taking some investor demand out of the market. While household debt is still growing faster than income, developments such as this allow the regulator and RBA to be patient.
Although the value of first home buyer commitments fell 3.2% m/m, this comes after two months of significant growth. Commitments from the segment are still more than 30% higher than a year ago, and at 11.5% reflect the largest share of the overall market in four years. The stamp duty savings for first home buyers in New South Wales and Victoria are certainly achieving their short-term objective of helping people into the property market.
Finance for the construction and purchase of new housing is still trending higher, especially in New South Wales and Victoria. This continues to imply that the current pickup in building approvals has further to run over coming months.