Housing Credit Increases In August
By Pete Wargent on 2 Oct 2014
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The Reserve Bank released its credit aggregates for August, which showed aggregates for personal credit (+1.1 per cent) and business credit (+3.2 per cent) to be marginally higher over the past year.
Typically this leads to debate about productive versus unproductive lending, but since I don’t think is likely to change as I’ve looked at previously in some detail, there is little value in revisiting today.
House Lending Robust
The data shows owner-occupier credit increased by a seasonally adjusted $4 billion in August and investor credit by a seasonally adjusted $3.1 billion.
That reflects a booming Sydney property market and a steady recovery in most other markets.
If you look at the past two years of data you can see that the gradient over investor credit is a little steeper than that of owner-occupier credit.
“Investor lending has been rising more strongly than owner-occupier lending in this cycle.”
Of course since these are credit aggregates it is largely the rate of growth that we are interested in.
Plotting the credit growth figures shows that housing credit has picked up, but not to the same extent seen in previous cycles.
There are a number of reasons for that – we’re coming from a higher base, more purchases may be funded offshore, and crucially, most property markets outside Sydney just aren’t showing particularly strong mortgage demand as the Housing Finance data will reveal in more detail later in the month.
Investor Lending Driven By Investors In Sydney
Smoothing the long run figures on a rolling annual basis clearly shows that investor lending has been rising more strongly than owner-occupier lending in this cycle, which is particularly being driven by property investors in Sydney.
The seasonally adjusted percentage share of property investor credit at 33.9 per cent is now one tick higher than the 33.8 per cent share of credit which was in evidence in October 2004.
Overall, there was nothing unexpected from this data as low interest rates continue to see demand for housing credit rise in aggregate.
However, the ABS data for Housing Finance and Lending Finance will shed more light on a state by state basis in the next two weeks.
Expect to see Sydney driving a huge bulk of the investor lending, with demand having eased in most other cities last month.
