Over the past 14 months, the RBA's record low interest rate of just 2.5% has pushed huge amounts of investors into Australia's $1.32 trillion property market.
Indeed, according to the CoreLogic Home Value Index, house prices in Sydney and Melbourne have increased 13.2% and 8.3%, respectively, over the past year. Followed by prices in Brisbane/Gold Coast and Hobart which are up 6.2% and 5.2%.
However despite some commentators suggesting house price growth is slowing, in the face of a resources sector downturn, Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) are showing no signs of slowing down.
According to APRA's Monthly Banking Statistics for October, the two big banks are growing at a faster rate than their larger counterparts, Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC).
Year over year, ANZ and NAB grew their housing portfolios 7.80% and 8.05%, respectively. This compares to Westpac and CBA who grew their portfolios at a solid 7.28% and 6.87%. The results have been driven higher by increases in lending to investors but also owner-occupiers.
Amid concerns of a possible bubble with prices being driven higher by SMSFs and foreigners, it's worth noting which bank lends the largest proportion to property investors.
Currently both Westpac and CBA, at 44% and 35% respectively, lend the greatest amount of their total housing portfolios to investors.
Buy, Hold, or Sell?
I'd buy ANZ before any of the other three banks but I am giving all the big banks a wide berth. Falling commodity prices, rising unemployment, a pricey property market, very low amounts of bad debts (which boosts profits) and high share prices, mean now is not the time to be jumping on the big bank bandwagon.
