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posted on 19 December 2015

The Aussie Investor Housing Party Is Over For Now

from CoreLogic

-- this post authored by Cameron Kusher

The Australian Bureau of Statistics (ABS) released housing finance data for October 2015 earlier this month. The data showed an ongoing decline in investor housing finance commitments as owner occupier demand rebounded. As we've commented before, the data is being influenced by many

Authorised deposit-taking institutions (ADIs) reclassifying investor mortgages as owner occupier mortgages. This is muddying the results to some extent nevertheless, we are also seeing tighter lending criteria for investors which is clearly also having an impact on demand and causing it to slow.

In October there was $32.6 billion worth of housing finance commitments nationally which was the lowest by value since March of this year. This $32.6 billion was comprised of $21.2 billion in commitments to owner occupiers and $11.5 billion worth of investment commitments. Over the month, owner occupier commitments rose by 0.4percent while investor commitments fell -6.1 percent. Year-on-year owner occupier commitments are 21.2percent higher while investor commitments are -9.2percent lower. After peaking in April this year at $14.2 billion over the month, the value of investor housing finance commitments have fallen by -18.9 percent.

The components of owner occupier lending were recorded at $1.8 billion for construction of dwellings, $1.2 billion for purchase of new dwellings, $6.8 billion in refinancing of established dwellings and $11.3 billion worth of commitments for purchase of established dwellings. Refinancing now accounts for almost a third of all owner occupier housing finance commitments. Year-on-year the value of commitments for construction of dwellings are -4.5 percent, purchase of new dwellings are +32.4 percent, refinances are +26.9 percent and purchase of established dwellings are +21.9 percent.

Investor housing finance commitments are split into two components, commitments for construction of dwellings and commitments for established housing. The value of these two categories were recorded at $1.0 billion for construction of dwellings in October 2015 and $10.5 billion for established housing. The value of investment commitments for established housing was at its lowest level since February 2014 in October 2015. Year-on-year the value of commitments for construction of dwellings is +31.8 percent compared to an -11.7 percent fall in commitments for established housing.

If we look at the total split between housing finance commitments for new housing stock (owner occupier construction of new dwellings, owner occupier purchase of new dwellings and investor construction of dwellings) $4.0 billion was committed to in October 2015 which was a record high. In comparison, $21.8 billion was committed to over the month for existing housing stock (owner occupier purchase of established dwellings and investment commitments for established housing). The $21.8 billion was actually the lowest value of commitments for new stock since May of this year. As a proportion, finance commitments for new stock accounted for 18.4 percent of all commitments in October 2015 which was its highest level since they accounted for 19.6 percent of all commitments in February 2014.

Investor demand in the housing market from domestic borrowers is waning and we expect that this trend is set to continue over the coming month, particularly in light of slowing value growth in Sydney and Melbourne. Meanwhile, owner occupier housing demand is picking up however, will it be big enough to offset the slowing investor demand? Time will tell although it will be interesting to watch given you can only own one owner-occupied property but may own multiple investment homes. Demand for new stock is also climbing which is in line with the rise in housing construction taking place. While there is no doubt plenty of new properties are purchased by overseas investors it is encouraging to see that local buyers are also participating in this market. From here it will be interesting to see how much further investor demand slows and whether the pick-up in owner occupier demand eventually starts to result in more first time buyers too.

© 2015 CoreLogic, Inc. All rights reserved.


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