Mortgage demand strong despite APRA attacks

by Miklos Bolza04 Jul 2017
Mortgage demand in the Australian market remains at relatively strong levels in spite of recent moves by the Australian Prudential Regulation Authority (APRA) to curb investment and interest-only lending.

The latest CoreLogic Hedonic Home Value Index looked at data from lenders across the firm’s valuation platforms and found that figures for May and June were only 3% lower than the same period in 2016.

“The reasonably steady level of valuation events suggest buyers remain active, despite higher mortgage rates, and are potentially shopping around as credit conditions tighten,” said CoreLogic head of research Tim Lawless.

Trends since the beginning of the year were pretty clear, he told Australian Broker, with investment loan growth peaking in December 2016 and starting to drift lower after that.

“This was before the most recent round of macro-prudential changes by APRA came into effect. I wouldn’t be surprised if we see investment slow further from here as lenders disincentivise interest-only loans through higher mortgage rates while also tweaking their own internal risk policies particularly for investment loans and mortgage lending into some of the riskier aspects of the market.”

This includes the inner city apartment markets in Melbourne and Brisbane, Lawless said. Perth had also seen high valuation numbers at settlement becoming less than the contract price – a trend which could place off-the-plan buyers in some level of finance shock, he added.

“Overall, I think we’ll see some moderation in investor activity in the marketplace. Also those investors who still want to be active in the market will probably be utilising the services of a broker just to help them shop around and find those lenders that are willing to supply them with credit.”

APRA would also be closely monitoring any deflection of investment and interest-only lending into the non-bank sector, Lawless said.

There were other organic factors which would also curtail demand, he added, including affordability constraints for investors needing to find a deposit amongst rapidly inflating house prices.

Reaching peak housing

The Home Value Index also shows a rebound in capital city dwelling prices of 1.8% in June after a drop of 1.1% in May.

“This stronger month-on-month reading can be partially explained by the seasonality in the monthly growth rates. Adjusting for this effect suggests an easing trend in housing value growth has persisted through the second quarter of 2017,” Lawless said.

While the market has hit the peak rate of growth, dwelling values weren’t falling on a consistent basis yet, he added.

“There has been a little bit of volatility from month to month but I think the quarterly growth rate is probably the best indication of how the market is travelling. A 0.8% rise over the June quarter is down from a rise of 3.5% over the March quarter over the combined capitals index.

“Sydney slowed from 5.0% over the March quarter down to 0.8% over the June quarter. Melbourne was a little bit more resilient with growth easing from 4.2% over the March quarter to 1.5% over the three months ending June.”

Related stories:

Residential lending hits $1.56trn

House prices in the eastern capitals to decline

Census shows decline in mortgage repayments

COMMENTS

  • by Battlers Advocate 4/07/2017 10:57:01 AM

    I can understand this. APRA and the banks have just stopped the battler from investing buying it will not stop those with strong incomes.
    APRA has single handedly with the help of its corrupt and greed driven side kick ( the banks) barred the battler from having a go!
    Well APRA done for cutting a greater divide between the rich and the poor!

  • by Just your average resi investor 6/07/2017 2:50:36 PM

    Plus investors who hopped onto the growth ride from 2000 onwards wouldve been handed significant buffers via irresponsible refinancing that banks happily dabbled in.
    Some of us are sitting on $300-500k in offsets, pre APRA intervention.

    We're sitting on the cash to deploy as and when bargains come up. Maybe some bank foreclosures when rates climb more.