Now this could be a problem for property in 2019 – housing credit has no pulse

While it may be a happy new year for most of us, it’s not so much for bankers, with lending growth continuing to flounder. 

The Reserve Bank’s latest figures showed credit growth slowing to 4.4 per cent, down from 5.2 per cent a year earlier, and broad money growth at fresh quarter-century lows of just 1.86 per cent.
It was noteworthy to hear last week that the RBA has been watching the gross household debt-to-income ratio as a main point of concern, especially as this ratio has already peaked is now falling.
The distinction from housing debt-to-income was quite interesting (to me at least) as the lines between housing, small business, and personal credit are blurred at best, with small business loans often secured against a home, and so on.

Property is a game of finance

As you can see in the chart below, changes in the direction of housing credit growth have tended to lead changes in dwelling price growth.
You can also see that no such change had occurred by the end of November 2018.
A simple credit impulse model as favoured by ANZ economists suggests that capital city (i.e. Sydney and Melbourne) dwelling price declines should moderate, although there are several factors unique to this cycle – not least the boom and bust in Chinese investors – that could throw the model a bit off course (this may have already happened to some extent since 2014).

Lowest investor credit growth on record.

Investor credit growth was already at the lowest level on record, and it fell to even lower levels last month, allowing APRA to remove another of its now-redundant arbitrary caps, this time on interest-only lending.
Given the enormous growth in the population aged 25 to 34 in particular, this is now a remarkably low level of growth in investor credit, even if it did follow on from a boom.
Not surprisingly the growth in owner-occupier credit also declined for a ninth consecutive month.
CoreLogic will release its latest home value index for the month of December, and this will show significant declines for Sydney and Melbourne in 2018.

The wrap

In short, business credit was moderate, personal credit was negative, and housing credit has no pulse – let’s hope that doesn’t turn into a full-blown coronary.

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Pete Wargent


Pete is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. Using a long term approach to building businesses, investing in equities, & owning a portfolio he achieved financial independence at the age of 33. Visit his blog

'Now this could be a problem for property in 2019 – housing credit has no pulse' have 3 comments


    January 3, 2019 Stuart

    When the house prices rise faster than wage growth, then there is by definition a short fall in disposable income after taxes and property costs (mortgage, rates and utility). If prices are rising it is a serious pressure on family life, if they are flat it is just a game of robbing Peter to pay Paul.
    For investors rising prices and rates are great, but are we cooking the goose that laid the golden eggs, or should we forget the Aussie renter and concentrate on the affluent Asian students tolerating our largely second rate Universities to get PR. I write as an ex Tutor in Universities and have heard too often the degree are just tolerated to get PR.
    Are we seeing rising demand or demand just out striping supply with population growth. GDP keeps growing, but GDP/capital isn’t ie we are getting poorer to keep the navanna of house price growth.


      Michael Yardney

      January 3, 2019 Michael Yardney

      Stuart – thanks for your comment – but overall as a nation we are getting rich – and it’s not just the rich. Our “poor” are richer than the rich in many countries.



        January 3, 2019 Stuart

        True, property has made me quite wealthy. As ever more jobs casualize and prices rise it is getting ever harder to get a first house for the young. I was told by Chinese students that apartments can be on multiples of 20 x average income to buy. These students say an apartment takes six pockets, ie yours, your parents and grandparents, to buy. I wonder if this is not a global asset bubble.

        That said I enjoy your articles and have a house on acreage, land for two units in a growing suburb, which I will build on once title is released, hold and let out both units.


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