Add Category
The number of home loans being given to Australians has fallen for the third month in a row, fuelling speculation of a property downturn following a crackdown on investor loans by the federal government.
Sydney house prices not falling
Another housing story, but an important one as it cuts through the noise from those screaming disaster or never-ending boom. Michael Pascoe comments.
The figures, released by the Australian Bureau of Statistics on Friday, show loans to investors have fallen to their lowest level in a year, down from a high of above 50 per cent in January.
The number of all home-loan approvals fell 1.9 per cent in April, as banks begin to react to the orders of the market watchdog to tighten lending due to risks to the broader economy.
ANZ was the first of the big banks to respond to the figures, cutting rates to owner-occupiers by 5 percentage points, while pushing up investor only loans by 30 percentage points.
Banks have been ordered to put the brakes on investor loans, limiting them to less then 30 per cent of all mortgages, while also restricting total lending to investors below 10 per cent growth a year.
A report from the OECD on Thursday warned a large fall in house prices was the single biggest threat to economic growth and risked "significant job losses".
Combined with the March figures, the 2.3 per cent drop represents the steepest decline in loans to investors since the last time the Australian Prudential Regulation Authority (APRA) was forced to take action against risky investor lending in mid-2015.
JP Morgan economist Henry St John said there was evidence the Sydney and Melbourne property markets were cooling as the tightening of interest only mortgages placed "fairly immediate downside pressure".
House prices fell nationally for the first time in 18 months in May, led by a 1.3 per cent drop in Sydney and 1.7 per cent in Melbourne, according to CoreLogic.
In good news for first home buyers, loans to those trying to get into the market crept up to 13.9 per cent, from 13.5 per cent in March, but remain at historic lows.
Commonwealth Bank economist Kristina Clifton said moves by the federal, Victorian and NSW governments to help out first home buyers would take two years to have any impact.
In June, NSW Premier Gladys Berejiklian announced she would scrap stamp duty for first home buyers purchasing homes worth up to $650,000, saving first home buyers $30,0000, while offering discounts on homes worth under $800,000.
The move followed similar initiatives in Victoria, and preferential tax treatment for first home buyers in the federal budget.
Ms Clifton said it was too early to assess the impact of APRA's regulatory changes but that tightening would also hit owner-occupiers.
"Indeed the new rules were put in place due to concerns around the rising share of interest only lending to owner‑occupiers," she said.
The Australian Housing and Urban Research Institute has warned the current rules do not go far enough and urged monetary and fiscal policymakers to do more. It said there was "a systemic risk if house prices fall or if interest rates increase," in a report released on Thursday.
"In a number of countries with similar situations, regulations have been implemented to limit the growth of household indebtedness and the need to ensure robust prudential regulation remains an important policy priority," the report found.