Lending Finance

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<div>Excluding property loans, low interest rates are not really stimulating commercial finance any longer.</div>
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<div>In fact the ABS Lending Finance figures showed total commercial finance declining moderately once again in August. </div>
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<div>In trend terms commercial finance has now been on the slide since May 2015. Yuck!</div>
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<br><div>As a result total lending finance is also about 9 percent lower than it was in Q3 2015, even after accounting for a rebound in property investor loans over the past seven months. </div>
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<br><div><strong><span style="text-decoration: underline;">Sydney investors return with a vengeance</span></strong></div>
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<div>I've been noting for a little while that property investor loans have been quietly creeping back in Australian month-on-month - and in New South Wales in particular - and now the cat is really getting out of the bag again. </div>
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<div>Here are the raw original figures for NSW investor loans in calendar year 2016, not seasonally adjusted:</div>
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<div>January $3.1 billion</div>
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<div>February $3.9 billion</div>
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<div>March $4.5 billion</div>
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<div>April $4.5 billion </div>
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<div>May $5.3 billion</div>
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<div>June $5.8 billion</div>
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<div>July $5.2 billion</div>
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<div>August $5.5 billion</div>
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<div>Remember these figures aren't seasonally adjusted, so the original or 'like-for-like' figures over the past few years look like this:</div>
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<div>August 2012 $2.7 billion</div>
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<div>August 2013 $3.5 billion</div>
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<div>August 2014 $4.6 billion</div>
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<div>August 2015 $5.0 billion</div>
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<div>August 2016 $5.5 billion</div>
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<div>The equivalent figure during the financial crisis nadir in August 2008 was just $1.7 billion.<br><br>Ex-refinancing, investors in NSW are now accounting for nearly 50 per cent of loans again.<br><br>No other state comes remotely close to that, even Victoria.<br><br>Following last year's macroprudential intervention, the value of property investor loans is now higher than a year ago in New South Wales, Victoria, Queensland, and South Australia, and activity looks to be rising again.<br><br>This means that as weaker results start to drop off, when plotted in rolling annual terms, the investor loans chart should be starting to turn up again.<br><br>And, so it is...</div>
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<div>Even Darwin investor loans now seem to have found a base (as do those in Western Australia) - something I didn't think I'd find myself saying in 2016 - with vacancy rates in the Northern Territory capital apparently now declining again. </div>
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<strong><span style="text-decoration: underline;">The wrap</span></strong><br><br>The increases may look to be moderate to date in rolling annual terms,.<br><br>But overall stock levels are well down on last year, hence the pressure on auction clearance rates in inner-suburban areas.<br><br>Sydney recorded a preliminary auction clearance rate of 80 percent today, with the median auction price running as high as $1,222,500.<br><br>It's another leg up.</div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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pwargent-M4siyDbqQY

Sydney property investors come storming back

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<div>It certainly seems that way.</div>
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<div>New South Wales investor loans burned 49 percent higher than a year earlier in January as investors chase Sydney property prices higher.<br><br>
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<div>In Victoria, investor loans were up by 35 percent, with Melbourne dwelling prices also rising. </div>
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<div>On the flip side, the value of investor loans in Western Australia was down by 16 percent year-on-year. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/03/16/A1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/16/A1.jpg" alt=""></p>
<p>In Darwin and the Northern Territory, meanwhile, the value of investor loans has dropped to the lowest level in a decade.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/03/16/A2.jpg" target="_blank">Click to enlarge</a></p>
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<p><br><span>Such can be the reflexive nature of markets.</span><br><br><strong><span style="text-decoration: underline;">Total lending pulls back</span></strong></p>
<div>Overall, January wasn't a particularly strong month for total lending according to the Australian Bureau of Statistics (ABS), with a decline in commercial lending in the month. </div>
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<div>After a recent spike in November - a near record month - total lending pulled back quite sharply at the beginning of 2017.<br><br>In fact, the result for total lending at $67.6 billion was a 5-month low. </div>
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<p><span>Meanwhile, investors pile into Sydney and Melbourne, fearful of changes being made to legislation.</span></p>
<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/"><span class="s2">blogger</span></a>.</span></p>
<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
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Rising prices beget more buyers?

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<div>Futures markets have been assigning fully a 100 per cent chance of an interest rate cut by the second half of this calendar year.</div>
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<div>Yet the ABS Lending Finance figures for November released recently suggested that low rates and a lower dollar may just be gaining a little more traction, with total lending increasing to a new trend high of $74.7 billion.</div>
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<div>In seasonally adjusted terms, total lending was some 20 percent higher than one year ago. </div>
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<div>Importantly, commercial lending picked up by a seasonally adjusted 1.1 per cent in the month, hinting at somewhat brighter news for Australian businesses, with business loans up by 23 per cent over the past year and revolving credit commitments up by 21 per cent.</div>
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<div>Arguably some of this additional lending might have been sparked by macroprudential measures taken to slow investment property loans. </div>
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<div>If that is truly the case, then it was a kick up the backside that Australian banks and lenders surely needed. The alternative narrative may simply be that the lower dollar is gradually encouraging competitiveness and investment. Your call.</div>
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<div>Lending to owner-occupiers for housing purchases and construction continues to rise very strongly at the national level, trending up by 24 per cent over the year to a new high of $22 billion, although lending for major renovation activity has remained resolutely in the (unrenovated) doghouse.</div>
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<div>Meanwhile, personal finance lending continues to slide (except for cars!) to sit at 9 year lows, suggesting that consumers are behaving rather more cautiously.</div>
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<strong><span style="text-decoration: underline;">Investor loans consolidate</span></strong><br><div> </div>
<div>I looked at the surprisingly strong November Housing Finance data last week <a href="https://petewargent.blogspot.com.au/2016/01/housing-finance-wallops-expectations" target="_blank">here</a>. </div>
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<div>The Lending Finance release today provided more detail at the state level, and it revealed a moderate rebound in November investor lending in New South Wales ($4.8 billion), Victoria ($2.8 billion), Queensland ($1.6 billion), and South Australia ($0.4 billion). </div>
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<div>Looked at in rolling annual original terms, the chart will now begin to show that cooling macroprudential measures initiated by the regulator APRA have tamed the investor beast. </div>
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<div>The latest available figures - as well as initial forays back into the investor market by banks such as AMP and Suncorp - imply that monthly investor lending may begin to track at around $11 to $12 billion per month, well down from the all-time record $14.2 billion we saw in April 2015.</div>
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<div>A cautionary word to be noted here is that in some markets the slowdown in investor lending has largely been matched with an increase in owner-occupier lending, suggesting that loan finance is seeking the path of least resistance.<br><br>
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<div>To take the example of New South Wales, total November housing finance of $13.9 billion in original terms suggests that in aggregate lending has been fairly flat for the past five months, and is still up by 19 per cent from a year ago.</div>
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<div>Thus while investor loans are down by about 12 per cent over the year, owner-occupier lending has gone berserk to be up by 48 per cent over the year. </div>
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<div><span>It is far from such a buoyant picture everywhere, however. With asking rents having tanked, investor loans are decelerating at an alarming pace in the Northern Territory, and this time around there may be no China-led commodities boost to save the day.</span></div>
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<div><span>As such, all key indicators are pointing to a significant and arguably overdue correction in the Darwin property market.</span></div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Owner occupiers overtake investors: Pete Wargent

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<div>Today's Lending Finance figures from the ABS showed that total lending is trending down from a relatively high level. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/04/13/C3.jpg" target="_blank">Click to enlarge</a></p>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/13/C3.jpg" alt=""></div>
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<div>You'll have to subscribe for my reports to get the industry level insights as there isn't enough space for them here, but summarily commercial lending to businesses is rather struggling along. </div>
<div><strong><span style="text-decoration: underline;"> </span></strong></div>
<div><strong><span style="text-decoration: underline;">Reflexivity in action</span></strong></div>
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<div>I will just take a quick look at property investor loans here, though, as this is always a popular data series. </div>
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<br>The value of investor loans is still trending down in Western Australia, though of course the median value of property has also declined. </div>
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<div>Most of the recent resurgence in investor lending since the ALP pledged to quarantine negative gearing deductions to new builds has been seen in Sydney and then Melbourne, in that order. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/04/13/C1.jpg" target="_blank"> Click to enlarge</a></p>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/04/13/C1.jpg" alt=""></div>
<p><br><span>Meanwhile, investors continue to give Darwin the cold shoulder.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2017/04/13/C2.jpg" target="_blank">Click to enlarge</a></p>
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<div>Paradoxically, macroprudential policies implemented at the national level are needed by many of Australia's declining housing sub-markets like a hole in the head. </div>
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<div>That's ultimately why investors need to focus on quality - it doesn't necessarily matter all that much what 'the' Aussie housing market is doing, rather that the property or properties you own is doing relatively better than the rest! </div>
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<div>This is particularly true now that banks are becoming far less inclined to extend loans to investors for large portfolios, while implementing tighter serviceability criteria. </div>
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<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank"><span class="s2">blogger</span></a>.</span></p>
<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
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Investors pile into Sydney: Pete Wargent

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<p>Commercial lending finance was weaker in the month of December, giving back a fair chunk of the 15 percent jump from November.</p>
<p>Nevertheless the trend for monthly lending finance hit it highest ever level at more than $73 billion. </p>
<p class="p3"><a href="https://www.propertyobserver.com.au/images/2017/02/15/A2.jpg" target="_blank"><span class="s1">Click to enlarge</span></a></p>
<p class="p3"><span class="s1"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/15/A2.jpg" alt=""></span></p>
<p class="p3"><span class="s1">At the industry level, there are no signs of any rebound in financing for the mining sector, suggesting that the recent boom in coal and iron ore prices is unlikely to lead to any significant increase in resources investment. </span><span style="font-size: 12.16px;"> </span></p>
<p class="p3"><span class="s1">In fact, financing for the mining sector crashed by more than two-thirds over 2016, with the best performing sectors instead including construction and transport. </span></p>
<p class="p6"><a href="https://www.propertyobserver.com.au/images/2017/02/15/A4.jpg" target="_blank">Click to enlarge</a></p>
<p class="p6"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/15/A4.jpg" alt=""></p>
<p class="p3"><span class="s2"><strong>Investor loans - a mixed picture</strong></span></p>
<p class="p3"><span class="s1">The national rebound in investor loans in 2016 masks a huge divergence in fortunes around the traps.</span><span style="font-size: 12.16px;"> </span></p>
<p class="p3"><span class="s1">In Sydney, investors are well and truly back with $6.3 billion of investor loans in December 2016 being some 36 per cent higher than the $4.6 billion seen only a year previously. </span></p>
<p class="p3"><span class="s1">There was also a resurgence in investor lending in Victoria, but most other states and territories are only seeing activity levels that are lower than in the prior year. </span></p>
<p class="p6"><a href="https://www.propertyobserver.com.au/images/2017/02/15/A1.jpg" target="_blank">Click to enlarge</a></p>
<p class="p6"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/15/A1.jpg" alt=""></p>
<p class="p3"><span class="s1">In the resources-focused Northern Territory, meanwhile, the 12-month moving average for the value of investor loans has collapsed by 51 per cent from the peak.</span></p>
<p class="p3"><a href="https://www.propertyobserver.com.au/images/2017/02/15/A3.jpg" target="_blank"><span class="s1">Click to enlarge</span></a></p>
<p class="p3"><span class="s1"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/15/A3.jpg" alt=""></span></p>
<p><strong>The wrap</strong></p>
<p>Clearly a mixed picture for property investment loans, then, with the Sydney market looking set for a strong first half of 2017. </p>
<p class="p3"><span class="s1">The commercial finance picture is patchier, although the Reserve Bank's optimism appears to have been justified by a stonking NAB Business Survey.</span></p>
<p class="p3"><span class="s1">NAB reported today that business conditions had blown off spectacularly from a December reading of +9.9 to a 9-year high of +16.2 (New South Wales the clear leader of the states with </span>a reading of +23).</p>
<p>This was the strongest result since the financial crisis and miles above the long-run average reading of +5.</p>
<p>Business confidence also tore higher from +5.7 to +9.8 in January, while the employment index hit its highest level since 2011.</p>
<p>A seriously bullish survey.</p>
<p class="p1"><span class="s1"><em>PETE WARGENT is the co-founder of </em><a href="https://allenwargent.com/"><span class="s2"><em>AllenWargent</em></span></a><em> property buyers (London, Sydney) and a best-selling author and </em><a href="https://petewargent.blogspot.com/"><span class="s2"><em>blogger</em></span></a><em>. </em></span></p>
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Investor lending resurgent in Sydney: Pete Wargent

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<p>Lending finance was shaping higher again by July, back up to $71.6 billion in trend terms, to be +6.7 per cent higher than a year ago, and getting pretty close to the highs of 2015.</p>
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<br><div>Commercial lending to businesses picked up, which is generally seen to be a good sign, while housing lending to owner-occupiers hit a record high. </div>
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<br><div>Personal lending commitments are tracking back down at levels not seen since 2002.</div>
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<div>This was mirrored by data elsewhere, with the Reserve Bank's statistical tables showing average credit card balances at their lowest level in nearly a decade. </div>
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<br>This does not fit the stretched household budgets theme.<br><br><div><strong><span style="text-decoration: underline;">Investor juggernaut slowed</span></strong></div>
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<div>Property investment loans are being successfully slowed by regulatory measures, and this is now filtering through into the rolling annual data at the state level. </div>
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<div>Interestingly the credit squeeze may be impacting the states that were already weak more keenly, rather than New South Wales and Victoria, though lending to investors is set to slow across the board. </div>
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Elsewhere, investor loans are rolling over in the nation's capital.</div>
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<br>And in Darwin, err, yikes.</div>
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<br><div><strong><span style="text-decoration: underline;">The wrap</span></strong></div>
<div> </div>
<div>Overall, this was a positive result given the lift in commercial lending to business, while in the property market, lending continues to shift from investors to homebuyers.</div>
<div> </div>
<div>I had a meeting with the brilliant Jonathan Tepper of Variant Perception this week - a considerably smarter fellow than you or I - and it was interesting to compare notes on where Variant sees Australia's economy heading.</div>
<div> </div>
<div>While VP's research reports are confidential to subscribers, their leading index has rolled over on Australia's economy, a major driver of this being the coming downturn in residential construction.</div>
<div>
<br>Westpac's leading index has followed a remarkably similar trend. </div>
<div> </div>
<div>Residential construction made a very positive contribution to the economy is 2016, but by 2018 Westpac sees this as becoming an equivalently significant drag (and although non-residential building has been picking up, this is expected to be less labour-intensive. </div>
<div> </div>
<div>Job advertisements figures suggest that hiring will remain solid over the next 6 months, but it wouldn't be a shock if rate cuts are back on the agenda in 2018 especially after a weak inflation result for Q4 is released to the market early next year. </div>
<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank"><span class="s2">blogger</span></a>.</span></p>
<h3 class="post-title entry-title"> </h3>
<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
<p> </p>
</div>
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Property lending finance picks up: Pete Wargent

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<p class="legacy">GUEST OBSERVER</p>
<p>What used to be known as a requirement to lend responsibly is now regarded as red tape.</p>
<p>The National Consumer Credit Protection Act introduced by the Rudd government after the global financial crisis introduced responsible lending obligations that required lenders to ensure the loans they were offering were “<a href="https://www.asic.gov.au/regulatory-resources/credit/responsible-lending/" target="_blank">not unsuitable</a>” for borrowers.</p>
<p>No longer. If passed into law, changes announced by treasurer Josh Frydenberg last week in the leadup to the budget will remove the obligation for most lenders, allowing them to rely instead on the <a href="https://ministers.treasury.gov.au/sites/ministers.treasury.gov.au/files/2020-09/Consumer-credit-reforms-fact-sheet.pdf" target="_blank">information presented to them by borrowers</a>.</p>
<p>In the treasurer’s words, it will replace the current principle of “lender beware” with “<a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/simplifying-access-credit-consumers-and-small" target="_blank">borrower responsibility</a>”.</p>
<p>He says it will make it easier for consumers to borrow, which would have been a disquieting prospect during the borrowing and house price boom that peaked three years ago <a href="https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release">under the old rules</a> and was only slowed by intervention from the <a href="https://www.apra.gov.au/news-and-publications/apra-announces-further-measures-to-reinforce-sound-residential-mortgage" target="_blank">Australian Prudential Regulation Authority</a> (APRA).</p>
<p><strong>Safeguards offered…</strong></p>
<p>Frydenberg says there will be safeguards. Lenders will have to comply with APRA lending standards. The special restrictions on “small amount credit contracts” (a discrete category that covers payday loans) will remain in place. Debt management firms will be required to hold licences.</p>
<p>But the provisions will not require lenders to assess the crucial question of whether a particular product is suitable for an individual borrower.</p>
<p>For the first time in a decade, that will be up to the borrower.</p>
<p>Lenders might decide to do that, but they won’t have to. What the treasurer calls “borrower responsibility” will become “buyer beware”.</p>
<p>Lenders will be obliged to be members of the Australian Financial Complaints Authority and have to act efficiently, honestly and fairly.</p>
<p>And members of the Banking Association will be subject to a code of practice that requires them to exercise the care and skill of a diligent and prudent banker.</p>
<p>But the duty of a banker is to the bank. That means a banker’s job is to ensure that a loan can be recovered, perhaps by selling property, rather than that the borrower can afford to make the payments.</p>
<p><strong>…but bankers work for banks</strong></p>
<p>When the financial crisis struck, equity was stripped from family homes by lenders looking after themselves. The new proposed changes would allow it to happen again.</p>
<p>The government says lenders have had to devote substantial resources to checking incorrect and misleading information provided by borrowers.</p>
<p>But much of it would have come from mortgage brokers acting on behalf of borrowers but being paid as if they were lenders, receiving a commission related to the size of the loan.</p>
<p><strong>And brokers work for banks</strong></p>
<p>The Royal Commission recommended that brokers be subject to a new “best interest” requirement, which is due to come in in January, untested, just before the responsible lending requirement is withdrawn in April.</p>
<p>Commissioner Kenneth Hayne also recommended banning brokers’ commissions and having them accept payment instead in the form of an upfront fee paid by the borrower not the lender. The government at first accepted and then rejected the recommendation.</p>
<p>Even where they are not encouraged to over-borrow, consumers are often making decisions under stress or blinded by optimism bias.</p>
<p>Even where entirely honest they can be unable to make reliable predictions about the level of credit they can bear.</p>
<p>If the responsible lending rules we have are considered too prescriptive, complex and onerous as the treasurer says, a reasonable approach would be to make them simpler and principles-based rather than prescriptive as recommended by Commissioner Hayne.</p>
<p>The Australian Law Reform Commission has just commenced an inquiry into <a href="https://www.alrc.gov.au/inquiry/review-of-the-legislative-framework-for-corporations-and-financial-services-regulation/">how to simplify Australia’s complex financial services regime</a>.</p>
<p>The government might have asked it for a heads up or kept the responsible lending obligations in place until it saw what it had to say.<img src="https://counter.theconversation.com/content/146916/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;"></p>
<p><span><a href="https://theconversation.com/profiles/jeannie-marie-paterson-6367">Jeannie Marie Paterson</a>, Professor of Law, <em><a href="https://theconversation.com/institutions/university-of-melbourne-722">University of Melbourne</a></em>; <a href="https://theconversation.com/profiles/elise-bant-467235">Elise Bant</a>, Professor of Law, <em><a href="https://theconversation.com/institutions/university-of-western-australia-1067">University of Western Australia</a></em>, and <a href="https://theconversation.com/profiles/nicola-howell-1160247">Nicola Howell</a>, Senior lecturer, <em><a href="https://theconversation.com/institutions/queensland-university-of-technology-847">Queensland University of Technology</a></em></span></p>
<p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/its-about-to-become-easier-to-lend-irresponsibly-to-help-the-recovery-146916">original article</a>.</p>
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j.ballantyne1990-6AQqhLzZaK

It will become easier to lend irresponsibly, to help the recovery

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<p>EXPERT OBSERVER</p>
<p>The January housing finance report showed another robust broad-based gain, the total value of housing loan approvals surging 4.6%mth, above the consensus forecast of a 3%mth rise.</p>
<p>The upturn continues to be across both volumes and values – the number of owner occupier loans up 3.1%mth and up 11% from their low last May. The value of owner occupier loans is up 28% over the same period implying a sizeable 17% rise in average loan values.</p>
<p>Gains in the owner occupier segment have been across both upgraders and first home buyers, the latter showing a slightly stronger 20% in the number of approvals since May.</p>
<p>Investor activity also picked up but continues to show a more restrained upturn, particularly compared to previous cycles. The value of loans to investors rose 3.6%mth and is now up 22% from its May low but still 37% below its 2017 peak.</p>
<p>On a combined basis, the total value of loans was up 4.6%mth and 23%yr.</p>
<p>NSW and Vic continue to lead the resurgence, the total value of loans in NSW up +7%mth, +30%yr; and in Vic up 5.3%mth, 27%yr. The value of loans dipped 2% in Qld but is still up a solid 17%yr. WA and SA have seen more moderate 10% gains over the year.</p>
<p>Construction-related finance approvals showed a more convincing gain in Jan, loans for the purchase of newly built dwellings (including 'off the plan' purchases) posting a very strong 13.4% and construction loans up 4.2%. Overall, the picture continues to point to a clear turning point in non high rise building activity. The lift in purchases of newly built dwellings will also help high rise developers clear unsold stock but is less likely to drive a lift in new projects.</p>
<p>The finance figures confirm that the housing market was carrying strong momentum heading into early 2020. Auction markets suggest this has continued into February and early March. However, the worsening coronavirus shock will likely be a major disruption to activity in coming months.</p>
<p><strong>MATTHEW HASSAN</strong><em> is a Senior Economist for Westpac</em></p>
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Matthew_Hassan-HHWHptmrw4

Housing finance resurgence continues in 2020: Matthew Hassan

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<p>Lending to households building and purchasing new homes remained soft in November, with construction loans sliding 8.4 per cent, according to figures released from the ABS.</p>
<p>The seasonally adjusted figures saw first home buyer loans decline 0.9 per cent over the month, but remain 3.4 per cent up over the year.</p>
<p>HIA senior economist Georgan Murray said the weakness in construction lending in November is largely a legacy of the soft sales volumes that home builders were experiencing during the first half of the year. </p>
<p>To enlarge, <a href="https://www.propertyobserver.com.au/images/2020/1/16/New%20Loan%20Commitments%20ABS.jpg" target="_blank">click here</a>.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/1/16/New%20Loan%20Commitments%20ABS.jpg" alt=""></p>
<p>Number of new loan commitments in November. Source: ABS</p>
<p>"As conditions in the broader housing market recovered during the second half of 2019 lending to households purchasing established homes improved", Murray said.</p>
<p>"Lending to owner-occupiers purchasing established homes held steady in November, recording 0.1 per cent increase."</p>
<p>Despite the decline in lending to new homes, there was more positive news for the value of new home loans.</p>
<p>The value of new housing loan commitments rose again in November, up 1.6 per cent to take the annual gains to 10 per cent.</p>
<p>To enlarge, <a href="https://www.propertyobserver.com.au/images/2020/1/16/Value%20loan%20commitments.jpg" target="_blank">click here</a>.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/1/16/Value%20loan%20commitments.jpg" alt=""></p>
<p>Value of new loan commitments in November. Source: ABS</p>
<p>There was a further increase of investor activity, with a 2.2 per cent increase in value of home loans written for investors, however they are still 3.2 per cent down on the year.</p>
<p>The figure is around 10 per cent higher than the lowest point registered earlier in the year.</p>
<p>Despite the number of first home buyer loans declining 0.9 per cent, the value of loans for first home buyers rose by 2.1 per cent to be nearly 20 per cent up on the year as the market bounces back from its June low.</p>
<p>Paul Marshall, chief executive of RateCity.com.au, said first home buyers were taking the bull by the horns.</p>
<p>“First home buyers have made a comeback in the past year, with close to 20 per cent more borrowing compared to the year before, as the stars aligned for them,” he said. </p>
<p>“Three RBA rate cuts, a housing market that had lost some steam, and changes to serviceability increased the borrowing capacity for some people – a perfect storm for first homebuyers.</p>
<p>“November saw the highest level of new borrowing on record since October 2009 – around the same time the governments’ first home owner boost ended.</p>
<p>“While we haven’t returned to the peak of first home buyer levels, we’re likely to see more buyers continue to surge into the market this year, particularly helped along by the first home loan deposit scheme,” Marshall said.</p>
<div class="page" title="Page 1"> </div>
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jrobinson-rf4aSBido9

New home lending falls in November, but value of home loans rises

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<p>The value of new lending commitments to households rose 2.6% in February 2019, seasonally adjusted, according to the latest ABS figures.</p>
<p>The rise in lending to households in February follows a 2.3% fall in January 2019. </p>
<p>ABS Chief Economist, Bruce Hockman said: "Despite the rise in February, the longer term story is largely unchanged with new lending to households remaining subdued and well down on levels seen over the past five years. </p>
<p>"Lending for owner occupier dwellings in New South Wales is a good example of this broader story, with the series still down over 20% from the peak of lending in August 2017, even after recording an 8.2% monthly rise in lending commitments in February."</p>
<p>At the national level, the value of lending for owner occupier dwellings rose 3.4% in February, while lending for investment dwellings recorded a more modest rise of 0.9%. </p>
<p>The number of loans to owner occupier first home buyers rose 1.8%, slightly outpacing the rise in the number of loans to owner occupier non-first home buyers (up 1.6%). Both series though remain well below February 2018. </p>
<p>Lending to households for personal finance rose 0.4% in February after a 1.2% rise in January.</p>
<p>While this is the first back-to-back increase in lending for personal finance since late 2017, the components of this lending generally linked to household consumption remained relatively weak. </p>
<p>In trend terms, the value of new lending commitments to businesses fell 2.4% in February with weakness across most business lending categories.</p>
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