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Industry reacts to new ABS data showing continued housing finance falls

ABS housing finance figures show a continued fall in home loan lending as the fallout from the banking Royal Commission sets in.

ABS data released today shows a 0.9 per cent drop in investor lending and an 0.2 per cent in all lending from the previous month, according to the seasonally adjusted figures from the ABS.

While these falls are relatively minor, it shows a continued slide in home loan lending. Investors have dropped 15 per cent over the year, while the total lending figures have dropped 3.2 per cent annually.

RateCity spokesperson Sally Tindall said today’s figures were further evidence of the cooling of the Sydney and Melbourne housing markets, fuelled by the tightening of banks’ lending criteria.

“APRA has been very clever in motivating the banks to improve their serviceability policies,” she said.

“Findings from the Royal Commission have also had a major impact on loan application processes, with increased scrutiny on paperwork at every step in the process,” said Ms Tindall.

APRA’s serviceability guidelines include:

  • interest rate floors of above 7 per cent
  • interest rate buffers of at least 2 per cent.
  • greater scrutiny of high debt to income borrowers and
  • the implementation of maximum debt to income levels.

According to HIA, the value of housing loans to investors now sits at the lowest level since the start of 2016.

“The fall off in investor participation has been caused by a number of factors including tighter financial regulations and the targeting of certain loan products favoured by investors. The federal government targeted investors with two successive interventions in the market through APRA and state governments introduced punitive rates of stamp duty on foreign investors,” said HIA Principal Economist, Tim Reardon.

“Less investor involvement in the market is one of the reasons why we have seen a slowing in new home building and why we are expecting this slowdown to continue over in the next couple of years.

“In order to address the affordability challenge, Australia should be facilitating rather than impeding the delivery of new homes for all potential buyers – owner occupiers and investors,” said Mr Reardon.

He went on to say that investor participation in the housing market was crucial, and that a failure to address this would result in limited rental stock and have a long term effect on the market.

“Ample rental supply in Sydney and Melbourne has been instrumental in allowing their workforce and economies to expand,” said Mr Reardon.

However, Master Builder’s National Manager Economics and Housing, Matthew Pollock, said that the figures did show an increase in first home buyers.

“Importantly, as a share of total dwelling commitments, first home buyers ticked up slightly to a share of 17.6%,” said Mr Pollock.

“Total dwelling commitments have fallen for five consecutive months and are around 1,500 lower than the same month last year.

“However, it is worth noting that the April building approvals data improved in April, supporting Master Builder’s view that the trough in the residential building and construction cycle is likely to be moderate and short lived,” Mr Pollock said.

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