A look at mortgage lending across the states and territories

Late last week the Australian Bureau of Statistics (ABS) published lending finance data for June 2016. When this data is paired with housing finance data it provides valuable insights about housing finance commitments across each state and territory.

According to the data across the combined states and territories there was $34.8 billion in mortgage lending over the month. This $34.8 billion was split by: $14.0 billion in NSW, $9.9 billion in Vic, $5.3 billion in Qld, $1.6 billion in SA, $3.0 billion in WA, $308 million in Tas, $152 million in NT and $611 million in ACT. The below chart highlights the proportion of total housing finance commitments across each state over time. NSW and Vic between them accounted for 67.8% of total housing finance commitments which is fractionally lower than the record-high 68.0% in May 2000. This is despite the fact that these two states account for only 57 per cent of the national population. It does of course reflect that fact that housing in these two states are more expensive than elsewhere so borrowers are typically taking out larger loans than they would elsewhere.

Focusing purely on the owner occupier commitments, in June 2016, the value of owner occupier housing finance commitments across each state and territory was recorded at: $7.6 billion in NSW, $6.0 billion in Vic, $3.6 billion in Qld, $1.2 billion in SA, $2.2 billion in WA, $225 million in Tas, $106 million in NT and $408 million in ACT. Qld and SA were the only states and territories in which the value of owner occupier lending actually rose over the past month. While NSW and Vic accounted for 67.8 per cent of total housing finance commitments in June, they accounted for a lower 35.6% and 28.2% respectively of owner occupier housing finance commitments over the month. After recently peaking, the value of owner occupier housing finance commitments has eased and is now lower than previous peaks in all states and territories. Across the states and territories the declines from the peak in owner occupier housing finance commitments are recorded at: -12.1% in NSW, -7.3% in Vic, -9.6% in Qld, -0.2% in SA, -16.4% in WA, -15.0% in Tas, -36.5% in NT and -3.6% in ACT.

The splits across the investment segment of housing finance are more pronounced in NSW. Over the month of June, there was an uplift in investor housing finance commitments, with the value rising across each state and territory except for Tas. The value of investor housing finance commitment over the month were recorded at: $6.6 billion in NSW, $3.6 billion in Vic, $1.8 billion in Qld, $551 million in SA, $880 million in WA, $80 million in Tas, $62 million in NT and $214 million in ACT. NSW is attracting a disproportionately large volume of investment activity, accounting for 47.7% of all investor lending nationally. Although lending to investors has increased over recent months, it has fallen significantly from its recent peak. Across each state and territory, lending to investors is currently lower than its peak, with the declines recorded at: -20.6% in NSW, -16.5% in Vic, -38.1% in Qld, -19.2% in SA, -46.5% in WA, -13.1% in Tas, -61.7% in NT and -22.1% in ACT.

NSW and Vic are clearly the powerhouses of mortgage lending currently and this is reflected by the fact that over the past four years home value growth in Sydney and Melbourne has been much greater than all other capital cities. With investment lending significantly tilted to NSW and considering that in Sydney housing supply is ramping-up, rental growth is at historic lows as are rental yields and the growth cycle is very mature, it is difficult to determine exactly why investment remains so strong. The same could be said for Vic and Melbourne although it is attracting much less investment activity than NSW. With lenders already having tightened lending policies to investors, which was very effective initially, it will be interesting to see what the next steps are, particularly if the recent acceleration in lending to investors continues. No doubt regulators will continue to monitor this data very closely over the coming months. If investment lending continues to accelerate we may see further intervention in order to cool this segment of the market. Of course the influx of new units over the coming years, many of which have been purchased by investors, will also be a litmus test for the investment market.

 

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