Australian mortgage lending slows in April: ANZ Research

GUEST OBSERVER

 

Housing finance decreased in April, with investor finance posting a sharp 5 percent decline in the month.

 

Looking through today’s soft monthly growth, the housing market has shown clear cyclical improvement recently, reflected by the pick-up in house prices and building approvals. This cyclical rebound is likely to be further supported by the May interest rate cut. However, today’s data indicates that growth in the current cycle will be limited by soft household income growth, the presence of macroprudential policy targets, and concerns about future tightening of housing policy.

 

Today’s data was driven by a sharp monthly decline in investor lending. This continues to reflect the negative impact of macro prudential policy targets on investor lending, with lenders mindful of the regulatory investor lending growth target. Nonetheless, investor demand for housing is likely strengthen in the coming months, supported by the solid pick- up in house prices (Figure 3).

In comparison, owner-occupier finance posted an increase in April, with upgrader finance higher and first home buyer finance lower in the month. While upgraders remained the key to driving owner-occupier lending, first home buyers continued to be weighed down by housing affordability concerns, which are being amplified by weak wage growth.
Finance for the purchase or construction of new dwellings declined sharply in the month.

 

However, the pipeline of existing housing construction remains solid. Building approvals have trended higher recently, and are likely to be supported in the coming months by both solid house price gains and lower interest rates. As such, we continue to expect that housing construction activity will remain elevated in 2016, however today’s data indicates that any further growth is likely to be modest compared to recent years.