House prices fall again as investment loans drop to lowest level in 10 months
Treasurer Scott Morrison repeated that there were no “silver bullet solutions to making housing more affordable”. Photo: Alex Ellinghausen
Home loans to investors have fallen to the lowest level in 10 months following a regulatory clampdown and the Turnbull government’s efforts to cool the Sydney and Melbourne housing market.
Figures released by the Australian Bureau of Statistics on Monday show home loans to investors as a proportion of all loans dropped 1.25 per cent in March to 48 per cent, down from a high of over half of all home loans in January.
The slide has triggered a dip in property prices across five of Australia’s capital cities, fuelling speculation of the end of the property boom.
The latest results from CoreLogic show the price of homes across Sydney, Melbourne, Brisbane, Adelaide and Perth falling by 0.5 per cent for the week and 0.9 per cent for the month.
Sydney’s house prices had not fallen in 18 months prior to April, while the number of home loan approvals fell 0.5 per cent in March, dashing expectations of a flat result. Overall, the total value of lending to investors moved slightly higher in March after a 5.7 per cent fall in February.
The figures have been released a week after the federal budget placed further restrictions on the market.
The government has targeted investors by limiting the depreciation of equipment and travel costs they can claim with rental properties, restricting the number of foreign buyers in new developments, reducing capital gains tax concessions for foreigners and placing a levy on foreign owners who leave investment properties vacant.
The numbers also reflect the reaction of the big four banks to comments by Treasurer Scott Morrison in the last week of March after he voiced concerns over the “sharp increase in the level of investor credit”, and that measures to stop the growth in risky loans put in place by the Australian Prudential Regulation Authority (APRA) had worn off.
All of Australia’s major banks moved swiftly by raising interest rates on investor loans by 0.25 per cent, before sweeping measures were introduced by APRA to force banks to limit interest-only lending to 30 per cent of total new residential mortgage lending.
National Australia Bank went further on Monday, creating a confidential “black list” list of hundreds of suburbs including the Rocks in Sydney, and Docklands in Melbourne, where would-be home owners would have to front up with bigger deposits and stricter lending conditions.
Deposits of up to 30 per cent for investors could now be required in some suburbs.
JPMorgan has warned housing investors to prepare for a rate rise of as much as 3 per cent to cope with the new regulations.
Today’s housing finance data provides a fairly strong signal that property market activity is beginning to slow.
JPMorgan economist Henry St John
“Taken with the context of last month’s report, today’s housing finance data provides a fairly strong signal that property market activity is beginning to slow,” JPMorgan economist Henry St John said.
In further rate rise threats, banks could hike rates for both investors and owner occupiers across the board, the chief executives of the Commonwealth Bank, ANZ bank, NAB and Westpac have warned, as they threaten to pass on the cost of the $6 billion federal budget levy on banks’ profits.
A rate hike could hit first-home buyers who have become more competitive in the market as a result of the government’s changes.
According to the ABS, the number of first-home buyer commitments as a percentage of total owner-occupied housing finance commitments rose to 13.6 per cent in March, from 13.3 per cent in February.
Of the loans made to owner occupiers, one in eight was used to build a new house, therefore increasing supply and helping to ease affordability, while only one in 12 loans made to investors was to build a new property, pushing up prices.
The government hopes that allowing first-home buyers to salary sacrifice up to $30,000 in pre-tax income into their super accounts will give them better access to the market.
But an analysis of the government’s figures show that savers would be able to put away only an extra 1 per cent of the median property price in its target markets of Sydney and Melbourne under the government’s changes.
Speaking at the Australian Council of Social Services on Monday, Mr Morrison repeated that there were no “silver bullet solutions to making housing more affordable”, while warning that sweeping adjustments to policy settings in housing “risk cooling some red-hot markets while at the same time, causing a collapse in markets that are weak”.
[“source-timesofindia”]