Latest finance figures give an indication of what’s ahead | Pete Wargent

The ABS released its Lending Finance data and it was a good result.

Firstly, and most importantly, business lending is on the increase with another very solid 3.7 percent increase in commercial lending in July.

Commercial lending is now 31 percent higher over the past year represented by easily the strongest shape to the commercial lending finance chart we have seen since 2008, suggesting that a solid business recovery may be in the post.

Last week’s employment data also suggested that the labour market may have a little more life in it than had been feared.

That’s great news.

Interest rate futures markets certainly appear to believe so, with no further rate cuts priced in.

Housing investor finance

The housing finance component of lending finance superficially looked fairly flat, but that of course is akin to putting one of your hands in a boiling kettle and another in the freezer and surmising that your hands are, on average, quite OK.

In short, investor loans in many areas look as though they may have passed their peak, or at least hit a plateau for now.

Investor loans written declined moderately in July in Victoria, South Australia, Queensland and Western Australia.

Meanwhile investor lending in the Australian Capital Territory, which I haven’t charted here due to its immateriality, has been crushed, declining by 22 percent over the past year. The Canberra property market looks to be have become mired in “slow melt” mode.

How then, does investor finance look to be robust?

Summarily, because Sydney lending is (quite literally) booming off the charts with a monstrous $5,082,850,000 of investor loans recorded in the month of July for New South Wales.

That is more than 40 percent higher than anything we saw at the peak of the last lending boom in the lead up to October 2003.

Even allowing for a swell in Sydney’s population these are vast and unprecedented figures.

And this data series does not include loans financed by branches offshore or cash buyers from overseas, in particular from east Asia.

It looks as though I will need the recalibrate the y axis on our chart packs again, because New South Wales investor lending has blown off the top of it.

Over the past year the value of investor loans has exploded by 45 percent in New South Wales.

Elsewhere investor loans have been stone dead flat in South Australia and have demonstrated healthy levels of growth in Victoria, Queensland and Western Australia.

For completeness real estate investor loans have increased in the Northern Territory and Tasmania over the past year but Tassie is looking decidedly toppy after declines in July.

The NT data remains wildly seasonal and it is probably wise to leave the jury out on that one.

Is there any growth left in the Sydney property market?

[sam id=40 codes=’true’] A lot of viewpoints have been put forward about whether the Sydney property market has any growth left in this cycle.

The guys who called this Sydney cycle right were Louis Christopher of SQM Research and Dr. Andrew Wilson of Australian Property Monitors, and they see there being more capital growth in the pipeline, but at a slower rate than we have seen over the past year.

Analysis of the data shows the answer to be in the affirmative, especially in the suburbs and property types favoured by investors.

Around the rest of Australia we may well have seen the peak in property investor loans as demand has been pulled forward.

Outside of Sydney capital growth does not look strong enough to be creating new deposits.

Further, New South Wales is making a concerted bid to attract more Significant Investor Visa capital into the harbour city which can only drive speculative demand from China for Sydney apartment stock higher.



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Pete Wargent

About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


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