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Housing Investors Spearhead Strongest Credit Growth Since GFC

Posted: February 2nd, 2015 | Author: | Filed under: Australian Home Prices | Tags: , , , , , | Comments Off on Housing Investors Spearhead Strongest Credit Growth Since GFC

Housing Investors Spearhead Strongest Credit Growth Since GFC via ABC
Housing credit again led the growth, rising 7.1 per cent over 2014, including a 0.6 per cent increase in the month of December.

That sector was led by investor credit, which jumped 10.1 per cent over the past year, including a 0.9 per cent rise in December ::::

Lending to Australian businesses and households grew at the fastest pace in six years over 2014, with housing investors again leading.

Reserve Bank figures show credit grew by 5.9 per cent over 2014, the fastest pace since the start of 2009.

The December rise in housing finance matched the average monthly increase, highlighting that demand for home loans has not slackened, despite rhetoric from the banking regulator and RBA about tightening lending standards on investor home loans.

Extra supervision in this area was announced in December, but it may take a few months more to see if those measures are effective in slowing home loan demand.

More positively, business credit growth rose from an anaemic 1.6 per cent in 2013 to 4.8 per cent last year, including 0.5 per cent growth in December.

The only area of borrowing that lacked momentum was personal lending, such as credit cards, growing by 0.9 per cent last year, the same rate as the year before.

Foreign Investors Make-up 9 Percent of Australian Property Market

Digital Finance Analytics – DFA – surveyed 26,000 households, around 15 per cent of which were first time buyers, and asked them questions about their housing arrangements.

The answers to those questions allowed DFA to confidently estimate that foreign purchasers make up at least 9 per cent of the first time buyer investor sector.

DFA’s Martin North said that, if anything, that is a conservative estimate.

“It’s probably still understated, however, because I still think there’s another segment of investors from overseas who may be getting funding from the Australian banks, but I can’t get any data on that,” Mr North said.

Mr North said he has not analysed the broader market in the same way, but believes it would have a very similar proportion of foreign buyers as the first time buyer investor group.

The DFA principal said that the proportion of overseas buyers in some markets, particularly the inner-suburbs of Sydney and Melbourne, would be much higher still and certainly pushing up home prices.

“It’s certainly enough to move the dial in my view, particularly in Sydney where a significant proportion of these transactions happen,” Mr North said. “In other states I think the statistical representation is quite a lot lower but it’s growing so, for example, in Victoria we’re seeing it moving up quite significantly in some postcodes.”

First-time Home Buyers Opt For Investment

Martin North said the other clear trend in his study was for local first home buyers to increasingly buy an investment property rather than move in to their purchase.

The report estimates that 35 per cent of first time buyers were investors with mortgages, 57 percent were owner occupiers and 8 per cent did not take out a mortgage to purchase.

Mr North explained that many buyers who felt locked out by high prices in the areas they want to live were buying investment properties to get a foot into the market and a share of any capital gains.

“This is a significant and very worrying trend in my view, because essentially what we’re seeing is a skew much more towards the investment sector, people looking to gear, looking to speculate on future property price growth,” Mr North said. “There is a significant extra number of first time buyers who’ve gone directly to the investment sector, rather than buying an owner-occupied property, a high proportion of those are going to take a loan that is interest only.”

The study estimates that 36 percent of these first time investors have taken out an interest-only loan, which are considered much riskier than regular loans, because none of the principal owed to the bank is being paid down.

The report finds that 41 per cent of first time investors take on a loan paying both principal and interest, 11 per cent are overseas buyers who do not need finance, 3 per cent are local buyers not needing finance, 6 per cent got finance from their parents and 3 per cent got the money from elsewhere.


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The number of dwellings approved for construction has jumped in the latest official figures. The Bureau of Statistics estimates that more than 17,000 homes were approved in October, seasonally adjusted, an 11.4 per cent increase on the previous month.

That recovered the ground lost in September, when approvals fell around 11 per cent. Apartment approvals entirely drove the latest result, jumping by more than 31 per cent as house approvals fell marginally.

The Housing Industry Association is encouraged by the rise in the number of dwellings approved for construction. HIA senior economist Shane Garrett said approvals have been volatile lately, but there are still healthy signs for the sector :: Read the full article »»»»

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Detached house approvals fell a more modest 2.2 per cent at the start of winter, but are also up a more modest 13.1 per cent over the past year. The Housing Industry Association, which represents residential builders, says slow land release is likely to have capped the most recent construction boom.

Despite the downturn in new builds, home prices surged as the real estate market recovered from it’s autumn slump. Overall Australia’s home price boom shows little sign of slowing, with Sydney and Melbourne again driving price gains after a brief lull :: Read the full article »»»»

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Moody’s warns that the Australian property market is in danger of ‘overheating’ and rising housing prices could also jeopardise the country’s economic and financial stability, the agency blames low interest rates for fueling rising house prices, and says the trend can’t continue.

Despite such warnings, house prices continued their rise in the first quarter of 2014, with average year-over-year growth in Australia’s 8 largest cities crawling up to 8.3 percent, marking the highest growth rate in nearly four years.

House prices in Australia’s most populated city, Sydney, rose 16 percent over the past 12 months, while the Melbourne property market increased to 9.9 percent, according to RP Data figures :: Read the full article »»»»


source: abc
image source: abc

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