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Investors Increase Borrowing While Occupiers Take A Breath

19.05.16 | Marc Barlow | Blog

The Australian Bureau of Statistics (ABS) has just released its housing finance data for March 2016 which has shown that investors are increasing their borrowing to fund their financial strategies while existing or potential owner occupiers may be taking a breath and looking to hold on to their already established positions.

A Look At March Housing Finance

The ABS’s data revealed that the total amount of housing finance commitments for March was $32.7 billion; a figure which was down -0.2% lower month on month but overall 1.2% higher over a yearly basis.

Of the total money lent for housing finance purposes during March 2016 $20.7 billion (63.3%) of that was said to be to borrowers for owner occupier purposes.

The purchase of established dwellings by owner occupiers made up for just over half of that amount with $11.1 billion accounting for that, while $7.0 billion was borrowed for refinancing and the remaining amount off financing split between borrowing for the construction of dwellings and the purchase of new homes.

What these numbers indicate is a re-adjustment by the owner occupier sector which may be looking to take stock of their position with the seasonal winter months approaching as well as a federal election due to take place in July.

Investors Active And Making Moves

Investors on the other hand have been active in the housing finance market and as such March saw an increase in their housing finance commitments.

The ABS’s data revealed that $12 billion (36.7%) of the $32.7 billion that was borrowed from mortgage lenders was for investment purposes.

$10.2 billion of these funds were classified as commitments to established housing while a figure of $1.8 billion was cited as commitments to new construction – a number which is at a record high.

This would seem to indicate that there is an appetite for investors to partake in new builds as part of their financial strategies and in order to satisfy perceived demand in the Australian property market.

The Bigger Picture Of Lending And Price Growth

Taking a look at the overall trends in housing finance and there appears to be a slowing of that market after the property boom year of 2015.

Excluding re-financing the year-on-year change in housing finance commitments is down by -1.9% overall.

History shows that the slowing of housing finance commitments can act as a precursor to the slowing of home price growth, and with demand for owner occupier borrowing slowing it is possible that the growth of home values may slow also.

The Australian property market, and in particular the cities of Melbourne and Sydney, has enjoyed a sustained period of healthy price growth, and as such some slowing down in this area could not be considered to be entirely unexpected.