Investors show strength as home loans slow
Home loan approvals for June have come in lower than expected and with a surprise lift in investor lending, but analysts warn it should not be taken as a sign new lending controls are failing to slow the housing market.
Owner-occupier home loan approvals rose just 0.5 per cent in the month, falling short of market expectations of a 1.5 per cent gain.
The total value of housing finance rose 0.8 per cent to $33.3 billion in June, seasonally adjusted, according to figures released by the Australian Bureau of Statistics on Wednesday.
J.P.Morgan economist Tom Kennedy says since the Australian Prudential Regulation Authority (APRA) moved to limit interest-only mortgage lending in March, the number of refinanced loans has declined by more than seven per cent.
APRA's oversight prompted a round of rate increases, with banks making interest-only and investor loans more expensive in order to comply with the new limits.
"The undershoot relative to forecast appears to be a function of weaker-than-expected refinancing activity, which likely stems from enhanced macro-prudential measures weighing on banks' lending activity," Mr Kennedy said.
He said the 1.6 per cent increase in investment lending - up following two months of consecutive declines - was stronger than analysts had expected considering the recent rate hikes by the major lenders.
However he said the rise shown in Wednesday's data will likely be brief, with the lending controls expected to prompt a fall in property investor loans.
"Investor loan shares have been trending lower since late last year and we expect this theme to continue in the coming quarters," he said.
Despite the June rebound, the year-on-year increase in investor lending slowed to 5.7 per cent from eight per cent in May.
The share of loans to first home buyers rose to 15 per cent in June, from 14 per cent in May, but still remains well shy of historical levels, CBA economist John Peters said.
"The stamp duty reductions announced by the NSW and Victorian state governments began on 1 July may well engender some stronger outcomes for this beleaguered group," he said.
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