I keep careful track of finance approvals — they’re an important indicator of what’s ahead for property.
As I’ve often said: property investment is a game of finance with some houses thrown in the middle.
The good news is that the recently released ABS stats show housing finance approvals rose again across all sectors in February.
First home buyers are back in strength, while investor lending appears to have finished its earlier decline.
These results suggest there are no real signs of a significant correction ahead for our property markets which are now likely to stabilise as the year progresses.
The following graph from ANZ Bank show these trends well:
Source: ANZ Research
First home buyers are back
As you can see from the graph below first home buyers are back in the market, in part because of the NSW and Victorian state governments’ stamp duty incentives giving these buyers more borrowing capacity as they use the money they saved on stamp duty to bolster their deposits.
In fact, first home buyer lending is at its highest level in nearly five years and is up more than 40% over the past year alone.
Let’s take a long term look
As good as these figures are, they don’t really show how investor lending has fallen over the last few years.
The graph below from the HIA shows how the value of lending to property investors has fallen nearly 10 per cent over the last 2 years.
According to Tim Reardon, HIA’s Principal Economist.
“Investor participation in the housing market is vital for delivering enough rental accommodation to house a growing workforce, especially in economic hubs like Sydney and Melbourne.”
“Investors have been the target of a number of regulatory interventions and this has impacted on new starts in the residential building activity, particularly for apartments.
But recently banks see to have regained their appetite for new investor clients:
“Over the three months to February 2018, the value of investor lending slipped by 0.3 per cent compared with the previous quarter, which suggests that investment activity may be starting to stabilise” said Mr Reardon.
The bottom line:
The Australian property market peaked in September last year and since then house prices have slipped in some capital cities and growth has slowed in others, but I don’t see any reason for further significant falls in property values.
These latest finance approvals, the stabilisation in auction clearance rates and the banks’ increased appetite for lending suggests our property markets are experiencing a soft landing.
They are now stabilising and getting ready for a little growth in the second half of the year.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.