Lending finance slowing
The ABS Lending Finance for June showed a further slowdown in commercial finance.
There was a large 8.7 per cent drop in commercial finance in seasonally adjusted terms in June, or 2.2 per cent in trend terms.
Housing finance, inclusive of investor lending, increased by 1.7 per cent in June, after a sequence of softer results earlier in the year.
Overall, though, total lending fell by 4.7 per cent in June to plumb a 19-month low.
Lending totaled $64.6 billion in the month, some 12.6 per cent lower than one year ago.
This is pretty weak stuff, and one can only hope that recent interest rate cuts encourage businesses to get investing through lower borrowing rates or less stringent hurdle rates.
In saying that, and to keep things in perspective, lending finance is paring back down from a recent 7-year peak.
Credit card debt and transaction volumes remain down over the past year, a useful indicator suggesting that consumers are very much enjoying low mortgage repayments.
Annual commitments to the mining sector have absolutely crashed – down by 63 per cent since one year ago.
The only positive thing to say about this is that sooner or later, it will have to stop falling!
At the state level, I haven’t been able to say much positive about the state economy in South Australia for some years now.
But…SA is the one state where total commercial lending is actually rising slightly in the face of macroprudential measures (albeit there has been no absolute improvement on the numbers seen in Q1 2008).
Property investor loans
The lending finance figures reveal some interesting trends in investor finance at the state level.
We already know from the housing finance figures that investor lending has been rising again in recent months, despite remaining well below previous peaks.
Since the state level figures are presented in original terms (i.e. not seasonally adjusted) they are plotted below on a rolling annual basis, which is often the best way we can get a feel for what’s happening.
And that is to say, that tightening measures by the regulator have successfully slowed the annual value of investor loans.
Although lending has definitely pulled back, June itself was a massive month for investor loans in New South Wales.
The general meme of the day is that investors are being clipped out of the market, but hopefully you’re reading this blog to hear about tomorrow’s new trends today!
Now, remember this is historic data, and interest rates have been cut twice recently:
NSW investor loans (original)
January – $3.11 billion
February – $3.89 billion
March – $4.46 billion
April – $4.50 billion
May – $5.29 billion
June – $5.75 billion
June was the sixth greatest month on record for NSW investor loans, and I believe that it won’t be too long before we start seeing media articles on a Sydney property investor resurgence.
Darwin, on the other hand, is enjoying macro-prudential measures like a proverbial hole in the head.
That said, investor loans in the Northern Territory may at least just be establishing a base.
Overall, this was a weak result, which paves the way for even lower interest rates later in the year.
Fair warning, though – Sydney investors are back on the march, and APRA may need to tweak its regulatory measures again before too long.