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Property market sees investors continue to retreat as first home buyers march in

10-Sep-2017


Stephen Letts, ABC

The investors' loss appears to be the first home buyers' gain, as the rival bidders switched roles in July.

Investors weighed down by targeted interest rate hikes were in retreat for the third consecutive month, with the value of their loans falling by a solid 3.9 per cent to $12.1 billion.

In seasonally adjusted terms, the value of owner-occupier loans edged by 0.9 per cent to $21 billion, while overall commitments to buy slipped 0.9 per cent.

But the buyers with the biggest spring in their step appear to be first home owners, with number of loans to the sector jumping by 5.2 per cent over the month..

As has been the case in every month this year, first home buyers have carved out a larger slice of the market.

Having started the year near an historic low with just 13.4 per cent of all loan commitments, by July that had risen to 16.6 per cent.

Over the month, the average first home buyer loan rose by $4,000 to $321,800.

At the same time, the average loan size for all owner-occupied housing commitments fell $5,000 to $370,500.

"It looks like some stamp duty exceptions for first homebuyers following the 2017/18 round of state budgets has had a positive impact on first home buyer activity," CBA's Gareth Aird noted.

 

Significant weaknesses appearing: JP Morgan

JP Morgan's Henry St John says the property market is showing signs of some wear and tear.

"The average loan size for owner-occupiers contracted for a second consecutive month, having fallen from a local peak of $380,000 in May to $371,000 in July," Mr St John said.

"Refinancing activity, which in the owner-occupier component of the data requires mortgage holders to have shifted from one bank to another, fell 0.7 per cent in volume terms, and is now running at -16.8 per cent over the year.

APRA's second phase of turning the screws on investor lending in April, which saw some aggressive interest rate rises from the banks, appears to be working.

Mr St John says investor lending has now strung together six months' worth of predominantly weak data in this series.

"Investor lending values have now declined 11.3 per cent over the last 6 months, and the annual run rate is now effectively flat," he said.

"This is consistent with the slowdown in investor credit which we have observed in recent months, and July's numbers suggest that there is scope for investor credit to continue to grind its way lower as we approach year-end."

CBA's Gareth Aird said most of the indicators on the housing market are pointing to a slowdown in dwelling price growth, including credit, auction clearance rates and record low yields.

 

Construction financing holding up

Despite a slow down in construction financing — total lending for dwelling related construction fell by 3.7 per cent in July — it was off the back of a big 10 per cent jump in the previous month.

Mr Aird says the fall was not a cause for alarm.

"We don't see a hard landing for residential construction over the next few years," he said.

"The trends in the building approvals and lending data, coupled with strong underlying demand for housing, underpins our view that the decline in residential investment will be gradual and elongated.

"This means that the impact on the economy will be milder than in previous residential downturns."

However Mr Aird said the slowdown was likely to be a headwind on the economy over the next two years.


ABC News
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