Since moving through a trough in May, the value of new owner occupier home loan commitments has increased by 17.3% through to the end of September and the value of investor loan commitments is up 8.4%
The latest ABS data on new housing credit showed a sharp rise in the value of home loan commitments, driven by a surge in owner occupier lending as well as a smaller rise in investment lending.
The rise in the value of owner occupier housing finance commitments over the September quarter (+12.1%) was the fastest quarter-on-quarter gain since the September quarter of 2015 (13.7%), taking the value of new owner occupier home loan commitments 17.3% higher since bottoming out in May earlier this year.
Growth in investment lending hasn’t been quite as strong, however the value of investment loan commitments was up 6.0% over the September quarter, which was the fastest gain since the December quarter of 2016. The value of investment loan commitments is now 8.4% higher than the May 2019 trough.
With owner occupier credit outpacing investment credit, investors now comprise the lowest portion of housing loan commitments since the ABS records commence in 2003, currently tracking at 24.8% of the value of new mortgage commitments. In contrast, shortly after the first round of macro-prudential rules were introduced in December 2014, investors comprised 43% of national mortgage demand.
The trends in housing credit are similar across the states, with the value of owner occupier loan commitments generally outpacing investors.
New South Wales
The value of owner occupier loan commitments was up 12.3% over the September quarter, compared with a 3.3% rise in investment. Although investment credit growth is slower, NSW has the largest concentration of investment activity across the states, with investors comprising 30.5% of mortgage demand based on value. First home buyers have surged higher over the past couple of years, as stamp duty exemptions and lower housing values have encouraged first timers back into the market. First home buyers have comprised more than 25% of owner occupier mortgage demand since March this year, more than double the proportion of first home buyers prior to the market peak.
The value of owner occupier home loan commitments was 11.3% higher over the September quarter, compared with a 10.6% lift in investment lending. Non-first home buyers drove the quarterly gains, with the value of loans up 13.4%, compared with a 9.2% rise in first home buyer lending. The value of investor loan commitments remains almost 9% below the level a year ago, however Victoria is showing the second largest concentration of investors (after NSW), comprising 25.2% of mortgage demand in September. First home buyers have been holding above 30% of owner occupier mortgage demand since February this year.
Investors are driving the largest increases in the value of mortgage activity, with the value of investor loans up 12.5% over the September quarter, compared with a 8.4% lift in owner occupier lending. Despite the larger rise in investment lending, investors comprise only 17.9% of mortgage demand across Queensland, the second lowest proportion across the states (after WA). First home buyers showed a larger lift in the value of lending over the quarter, up 11.1% compared with a 8.4% increase in the value of non-first home buyer loans.
Non-first home buyers are driving mortgage demand across South Australia, with the value of mortgage commitments up 10.8% over the September quarter, compared with a relatively flat 0.8% lift in first home buyer lending and a 1.3% increase in investment lending. First home buyers have seen a stronger result over the past year, with the value of loans up 9.4%. The September data showed investors comprised 21.9% of mortgage demand, which was well below the decade average of 29.9%.
Mortgage activity is finally showing an upwards trend across Western Australia, with the value of owner occupier lending up 15.8% over the September quarter, while the value of investor loans surged 24.1% higher. The quarterly result was the strongest gain for owner occupier lending since 2009 and the surge in the value of investment loans was the highest since 2005. Mortgage lending is rising from a very low base, especially across the investor segment, after a prolonged period of weak credit growth.
Mortgage lending was positive on an annual basis across each of the broad market segments, driven by a surge in investment lending over the quarter (+32.4%) and a less substantial 26.2% lift in the value of owner occupier loans. Tasmania was the only state to record an annual lift in the value of mortgage commitments across each of the broad market segments.
The value of mortgages was down over the quarter and over the year across each of the broad market segments. Over the past year, investor mortgage commitments were down the most (-30.5%), with a large fall across the first home buyer segment as well (-29.7%). With housing values around 31% below their peak across the NT, first home buyers are taking advantage of very healthy levels of housing affordability, showing the highest concentration of any State or Territory across the NT, comprising 38.2% of owner occupier demand based on the value of new commitments.
Australian Capital Territory
The value of owner occupier mortgage commitments was up 20.7% over the September quarter, driven by a surge in first home buyer activity where the value of lending jumped 75% higher. The value of mortgage lending across the larger non-first home buyer sector of the market was up 10.3% and investment lending was 9.5% higher over the quarter.
The rebound in new housing credit flows is running in parallel with increased buyer activity and rising residential property values. According to CoreLogic’s Home Value Index, national dwelling values bottomed out in June this year, the same month that housing credit started to rise. The improved credit flows have been supported by APRA’s decision to relax borrower serviceability rules, as well as the lowest mortgage rates since at least the 1950’s.
The flow of new credit is likely to be a key factor monitored by policy makers. Any sign of a material rise in speculative buying activity, higher household debt or a slip in lending standards could be met by another round of macro-prudential credit tightening, however at the moment, despite the recent surge in housing credit, investors remains under-represented in the market and overall credit growth (based on the RBA credit aggregates) remains subdued, implying a strong focus on debt reduction from households. The next round of APRA statistics providing an insight into key metrics covering riskier areas of lending such as the proportion of interest only loans and the proportion of high LVR lending is due out next month. These statistics should provide some further guidance around any regulatory response that could impact on housing credit activity.