Private sector credit data released by the Reserve Bank of Australia (RBA) in late-July indicates that property investors are starting to move away from the Australian market. Housing credit in Australia increased by 0.3% in June, a slight decrease from 0.4% in May. At the same time, annual investor-loan growth dropped to 1.6% in June. Owner-occupier loans increased by 0.6% in June.
With credit growth to housing investors dropping to -0.1% in June, it shows recent developments in the Australian housing market is affecting investors. According to the Commonwealth Bank’s Economist Belinda Allen, changes in market conditions are thought to be the key drivers of recent declines in investor loans.
The key market changes behind the decrease in investor loans are:
- low auction clearance rates;
- declining house prices; and
- tightened lending criteria for investors.
This follows news from Westpac in July that it was discontinuing lending to self-managed superannuation funds (SMSFs). According to a spokesman from Westpac, the bank discontinued the sale of SMSF loan products and business lending to SMSFs to simplify and streamline SMSF products.
The move by Westpac was thought to be a result of tightened lending criteria for investors and increases in property speculation triggered by investing in property through SMSFs. In 2014, the financial system inquiry led by former Commonwealth Bank Chief David Murray recommended that the Government ban lending to SMSFs for property investment. The Government rejected this recommendation in 2014.
Loans to SMSFs for property investment aren’t offered by ANZ. The National Australia Bank (NAB) stopped property investment loans for SMSFs in 2015. The Commonwealth Bank of Australia remains the only “Big Four” bank to offer property investment loans to SMSFs.