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Investor housing credit falls for the first time since GFC

Growth in investor housing credit has fallen into negative territory for the first time since the global financial crisis, with year-on-year growth the slowest on record.

According to the latest data from the Reserve Bank of Australia (RBA), investor housing credit dropped by 0.1 per cent in June, the first month-on-month decline since February 2009, with the total value of investor housing credit falling from $592.4 billion in May to $591.6 billion in June.

Further, investor housing credit grew by 1.6 per cent in the 12 months to June 2018, the lowest rate of growth on record.

Speaking to Mortgage Business, principal and investment manager at the Australian Lending and Investment Centre (ALIC) Mark Davis attributed the drop to the tightening of lending criteria and macro-prudential measures imposed by the Australian Prudential Regulation Authority (APRA).

“It was always going to happen,” Mr Davis said. “The banks and the regulators have been playing a lot harder for investment loans and interest-only loans, and so investors have cooled off the market to some degree, which was the regulator’s intention because the market had gone up so much for the last three and a half years.”


Mr Davis said that it’s too early to tell whether such regulations have gone too far in restricting investor loan growth, noting that data released in spring would paint a better picture of the extent of the easing in investor activity.

However, Mr Davis said that the banks may have “gone to the opposite extreme” in their response to regulatory measures.

“The banks have probably reacted to regulatory actions a little too much, but time will tell how hard it is to get credit in the next six to 12 months.”

The mortgage broker also stated that he doesn’t believe falling house prices are too blame for the fall in investor activity, claiming that his investor clients are identifying opportunities in the softening housing market, but are finding it harder to secure finance to fund property purchases.

“Investors would look at this market as a positive, because you start to get bargains, and there starts to be opportunities for clients that open up,” Mr Davis added.


“They just want us to get funding from a financial institution.”

Mr Davis also noted that clients need to be better prepared when requesting finance, as loan assessors require more information.

“Our investors are more inquisitive. They need to be more prepared and ready, and also they need to be more patient because the banks are asking for a lot of things that they would never have even thought about asking for six months ago,” the broker said.

Additionally, the RBA revealed that owner-occupied housing credit was stable, rising by 0.6 of a percentage point for the fourth consecutive month (7.8 per cent year-on-year), with the total value of owner-occupied housing credit now sitting at $1.173 trillion.

Overall, housing credit increased by 0.3 of a percentage point in June (5.6 per cent YoY) to $2.839 trillion.

Dwelling approvals bounce

The latest data from the Australian Bureau of Statistics (ABS) has revealed that total dwelling approvals increased by 6.4 per cent (1.6 per cent YoY) in June (19,133 dwellings approved).

The uptick was driven by a 5 per cent (2.1 per cent YoY) rise in house approvals (10,127) and a 7.2 per cent (0.9 of a percentage point YoY) jump in dwelling approvals excluding houses (8,786).

However, reflecting on the data, ANZ noted that, despite the rise in dwelling approvals, it expects overall market softening to continue.

“Despite the strength in June, we continue to think that we are past the peak in housing approvals with the ongoing tightening of credit, evident in softening housing finance, likely to see approvals continue to trend lower,” ANZ noted.

“The backlog of work will keep activity elevated over the near term, but construction is expected to fall through the end of this year and 2019.”

[Related: CoreLogic analyses ‘credit crunch’ scenarios]

Investor housing credit falls for the first time since GFC
Arrow down, housing credit, falls, investor, GFC

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Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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