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‘Investor exodus’ is ‘welcome news’ to RBA, says lender

The prudential regulator’s lending curbs had the “desired impact” of triggering a “significant exodus of investors” from the residential property market and would be “welcome news” to the Reserve Bank, according to commercial property lender Thinktank.

In its quarterly update (July to September), Thinktank cited housing finance data from the Australian Bureau of Statistics (ABS), noting that in the year to May, residential lending dropped by 3.1 per cent, with investor lending falling by 13.1 per cent over the same period.

Director of Thinktank Per Amundsen said that the effectiveness of the Australian Prudential Regulation Authority’s curbs have prompted it to scale back its measures.

“It appears to show APRA’s tightening has had the desired impact, so much so the regulator has announced it has removed restrictions on ADI [authorised deposit-taking institutions] lending to investors,” the director said.

Mr Amundsen also made reference to the recent fall in home values across Australia’s capital cities, which culminated in a drop in combined capital cities property prices of 0.8 of a percentage point in the second quarter of 2018.

“The cities index for houses and units fell in four of the capital cities, with Sydney particularly dragging the chain with a 0.9 [of a [percentage point] decline in the quarter,” Mr Amundsen continued.

“And in the month of June, Melbourne and Sydney again retreated with slight falls of 0.4 [of a percentage point] and 0.3 [of a percentage point], respectively.”

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The director claimed that such price falls would have been viewed favourably by some observers, including the Reserve Bank of Australia (RBA), with governor Philip Lowe recently stating that such trends have “helped reduce the build-up in risk”.

“The monthly housing price statistics for the past three months to June 2018 have shown further levelling from the Sydney and Melbourne markets [more so in Sydney], welcome news to many observers, particularly at the Reserve Bank,” Mr Lowe said.

“There is now not much difference to be found between houses and units. Houses in Sydney were down by 3.3 per cent for the year to date, and units were down by 1.2 per cent as at June 2018. In Melbourne, houses were down by 2.3 per cent and units were 0.3 [of a percentage point] lower for the year to date.”

Thinktank stated that, based on the data, it has decided to revise its rating of the Melbourne and Sydney residential markets to “fair” (previously “good”). Adelaide and Brisbane are also “fair” while Perth has been rated as “weak”.

Further, while the Adelaide, Brisbane and Perth markets have been rated as “stable”, both Sydney and Melbourne have been categorised as “softening”.

Other findings from Thinktank’s quarterly update include:

  • Commercial markets remain strong in Sydney and Melbourne, with other cities stable.
  • In retail markets, department stores recorded a surprising upswing of 3.9 per cent in May after two months of falling sales; however, overall sentiment for department stores remains low.
  • Manufacturing continues to benefit from the demand for local apartment and infrastructure, which in turn is keeping industrial markets in a stable to improving position.

[Related: RBA monitoring credit amid ‘considerable’ investor fall]

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