Investor loans lead approval drop

by Rebecca Pike13 Dec 2018

The value of property exposures at the banks has increased over the year to September according to new figures, but new approvals continue to fall.

The Australian Prudential Regulation Authority (APRA) has released its Quarterly Authorised Deposit-taking Institution (ADI) Property Exposures publication for the September 2018 quarter.

The report looks at the value of loans the banks currently hold, as well as new loan approvals over the quarter.

While the value of loans has increased again, the total growth across the banks has slowed over recent years.

The report looks at all ADIs, but has more comprehensive figures on those with more than $1billion of residential term loans, including the number of new housing loan approvals.

At these banks, there was a decrease of 3.7% in the year ending 30 September 2018 compared to the year ending 30 September 2017.

Splitting this up, the number of approvals for owner-occupier loans increased by $4.1billion, or 1.6%, during that time.

Investor loans were the cause of the overall decrease, as these approvals dropped by $18.5billion, or 14%.

From these new approvals, 13.6% had a loan to value ratio between 80% and 90%, which was a decrease of 8.2% from the year before.

There were 6.7% of approvals with an LVR above 90%, which was a decrease of 12.2%.

Interest only loans saw a decrease of nearly 50%, dropping by $58billion to $59billion worth of loans.

Despite the decrease in new approvals, the banks continue to grow their overall value of property exposures.

Comparing with the quarter to September, the value of loans across both commercial property and domestic housing loans has risen.

Residential loans to households were $1.64trillion as at the end of September 2018, an increase of $83.1billion or 5.4% from the previous September quarter.

Owner occupier loans made up 66.7% of these and had an increase of 7.3%. Investor loans made up the remaining 33.3% with an increase of 1.6%.

ADIs with more than $1billion of residential term loans made up 98.9% of all such loans, totaling $1.62trillion.

APRA’s report shows that the average loan size was increased from last year at $274,000, compared to $265,000 from the previous September quarter. More than 26% of these loans were interest-only.

While the figures are increasing, the total growth has dropped over the last few years.

Commercial property exposures were $279.6billion, an increase of 4.6% from the previous year. Exposures within Australia were 86.3% of that figure, at $241.3billion.

The largest categories of commercial property exposures were office property at $84.8billion and retail property at $69.7billion.