Is the investor lending on a recovery mode?



Based on the Australian Bureau of Statistics, the new approvals in Australia property investment lending slightly rose 0.5% to $11.8 billion in July 2016 as compared to June 2015, driven by the Reserve Bank’s interest rate decrease. This growth raised arguments over a possible recovery of investor’s lending in Australia. Moreover, investors are hoping for a better performance in August.

On the other hand, the new owner-occupier loans fell 3.1% during July 2016 month to $19.9 billion as compared to June 2015, indicating the ongoing challenges in the property market. In addition, the number of new loans that were approved fell over 4.2% on the back of declining lending to make new purchases of dwellings, for construction of new homes and buying established properties. New loan commitments fell more than 6% during July 2016 while the overall new home loan approvals (investors as well as owner-occupier markets) fell over 1.8% in the month of July 2016 as compared to June 2016.

Value of dwellings and no. of dwellings commitments (Source: Australian Bureau of Statistics)

Moreover, International Strategic Studies Association warned that Australia is entering a major phase of their economic-strategic development and expects that the “changes in local banking policies” might lead to a decline in foreign direct investment in the property sector. As a result, the government’s ability to fund major programs in the defence and civil sectors might get affected. They warned that the property markets could also be affected in the coming months if government and banks do not take any steps.  On an overall note, even though there could be a certain level of improvement in investor lending during August 2016 given the RBA interest rate situation, the growth is still slow.

Overall, market believes that the lending to investors has continued to jump up as the proportion of owner-occupier loans to first home buyers fell to the lowest level while the 0.5% rise in investor lending is the highest level since August 2015.

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