CoreLogic RP Data has found that regulatory restrictions placed on finance for investment property have resulted in a sharp fall in the value of investor lending.
Commenting on yesterday’s CoreLogic RP Data Property Pulse report, research analyst Cameron Kusher cited higher mortgage rates, low rental yields and a maturing housing cycle as key contributors to the slowdown in investment activity.
“The reclassification of investor loans to owner-occupier loans is also muddying the clarity of the housing finance data,” he said.
“We’ve seen a noticeable slowdown in lending to investors over recent months.”
Since the value of lending to investors peaked at $14.1 billion in April 2015, it has fallen by 12.8 per cent to $12.3 billion in September 2015, Mr Kusher said.
“The value of lending to investors is now lower than the value of lending to owner-occupiers for new loans. The Australian Bureau of Statistics has noted that over recent months, many ADIs have been reclassifying some investor loans to owner-occupier loans,” he said.
As a result of the slowdown in lending to investors, the value of new lending in most states is now greater for owner-occupiers than it is for investors.
According to Mr Kusher, it is important to note that historically, it has been very unusual for investors to form a greater part than owner-occupiers of the new lending environment; however, this has been the case for most of the past year and a half.
The findings indicate that NSW is the only state in which the proportion of new lending to investors (51.7 per cent) is still greater than lending to owner-occupiers. Three months ago, the proportion of new lending to investors was higher than 50 per cent in NSW, Victoria and the Northern Territory.
A key policy change, implemented by APRA and covering lending by Australian banks, was to limit annual investor credit growth to 10 per cent. The latest data from the Reserve Bank shows that investor housing credit has increased by 10.4 per cent over the year.
Given this, Mr Kusher said, “there is still some further slowing in lending within the investor space which needs to occur”.
“Furthermore, most ADIs now have a higher interest rate for investment mortgages along with requirements for larger deposits,” he added.
“These factors are likely to contribute to a further slowing of mortgage demand from the investment segment of the market.”