Lending to property investors has crashed

A combination of stricter lending criteria, including bans on some sectors of the property investor market has seen lending to investors tumble to the lowest levels since the GFC in 2009.

According to the latest data from the Australian Bureau of Statistics (ABS), investor lending is down 20% year-on-year in April 2016.

Investor lending June 2016 - NAB

Source: NAB, Macrobond

The total value of lending in April fell 1.8% to $32 billion, seasonally adjusted, but lending for investment housing plunged 5% to $11.3 billion. Owner-occupied lending was virtually flat at $20.7 billion. The share of investor loans out of total lending has also dropped from highs of 43% last year to around 35%.

Housing finance has now fallen for three out of four months, with total lending down 4.4% for the year.

The results clearly show what many had expected. Investors have been leaving the market, but owner-occupiers appear to be continuing doing what they have always done. Moving up or down the property tree and refinancing to renovate.

However, the recent rate cut by the Reserve Bank of Australia (RBA) and news around auction clearance rates suggests investors are coming back into the market – although probably not as fast as last year due to the tighter lending restrictions imposed by the regulator.

Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) still continue to dominate lending as you might expect –even though much cheaper mortgages are available from other banks and non-bank lenders. That’s also despite the big four leading the way in cutting off lending to foreign buyers, increasing interest rates and tightening lending standards for investors.

Foolish takeaway

The ABS data is for April, and the property market appears to have already moved on, so it may be wise to not pay too much attention to this data and watch the auction clearance rates as a better forward indicator of where the property market is headed.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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