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Category: Economic Trends / Housing Industry / Business, Economics and Finance

Investors hit back in property market, lending rises 3.9pc in May

Monday, 11 Jul 2016 11:09:26 | Stephen Letts

The ABS says investors forked out $11.7 billion for property in May. (ABC News: Nic MacBean)

Property investors have shrugged off tougher lending conditions imposed by the big banks with a 3.9 per cent rebound in the value of properties purchased in May.

In seasonally adjusted terms, investors forked out $11.7 billion for property last month, a significant swing in sentiment from the 5 per cent fall the Australian Bureau of Statistics (ABS) reported in April.

However, investor loans are down 13.3 per cent from $13.5 billion recorded at the same time last year.

Overall, housing finance rose 1 per cent in May, largely held in check by a 0.6 per cent fall in owner-occupier mortgages to $20.5 billion.

While the value of loans increased, the number of commitments for owner-occupier dwellings fell by 1 per cent to 56,648, and the construction of new dwellings was down 2.7 per cent.

The consensus view in the market had been for a 2 per cent decline in lending activity despite the Reserve Bank's rate cut in May, which was followed up with a round of cuts in mortgage rates from the banks.

House price growth likely to cool, not collapse: UBS

UBS economist George Tharenou said investor lending now appeared to be stabilising after a period of sharp declines.

"Today's data shows signs of stabilisation, which suggests that price growth is likely to cool over the coming year. We expect [it to be] flat, but [that] does not indicate a collapse," Mr Tharenou said.

"Nonetheless, we still think the RBA is likely to cut the cash rate by another 25 basis points in August, given the persistence of low inflation, which should help to cushion the housing market in the face of record housing supply."

The stronger activity also showed up with the weekend's auction clearance rates edging up, although sales activity remains lower than in the lead up to the federal election.

The CoreLogic Property Market Indicator found nationally clearance rates of capital city auctions rose to 72 per cent, up from 67 per cent recorded during the election weekend.

Demand for property in Sydney remained strong with a clearance rate of 79 per cent, while bidding in Brisbane was restrained with only 44 per cent of auctions being successful.

The surprising strength — particularly in the investor sector — will be closely watched by the RBA, which had noted that dwelling prices had begun to rise again recently.

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