APRA Appears to have pulled investors out of the market

Caught this article from Andrew Wilson this morning. I've included the charts too.

Thoughts? Tasmania was a surprise (QLD, obviously not, though):

Latest ABS data confirms a sharp fall in investor activity over July as action taken by banks to moderate lending from this group appears to be impacting housing markets.
All states with the exception of Queensland reported falling lending commitments for residential investors over the month.

NSW investor finance fell sharply by 9.6 percent over the month with Victoria down by 4.4 percent.

The monthly proportion of investor finance to total residential loans approved in NSW fell to below 60 percent for the first time since February and at 58 percent was lowest result for that state since October last year.

In Victoria the level of investor finance approved over the month was also the lowest proportion of total housing lending recorded since February at 48.9 percent.

Despite the sharp fall in lending to investors over July, NSW still accounts for the lion share of national activity with 45.3 percent of all housing investment loans originating in that state.

Activity by investors has been a driving force of housing markets over the past year with NSW investment loans up by 30.1 percent over the first 7 months of this year compared to the same period a year ago.

Similarly Victorian investor finance is up 26.9 percent and Queensland 24.1 percent over the same year to date comparisons.

Sharply declining residential investor activity as a consequence of policy-directed stricter lending conditions initiated by banks recently will however not be welcomed by those underperforming state economies looking for the boost that solid housing market activity provides.

 

The post APRA world is starting to take shape.

 

Numbers don't lie but everytime I drive past an auction or open house its packed, maybe people are actually looking for bargains now :/

 

Any ideas on how Tasmania was able to see a gain during this period @C-mac or anyone???

 

The party is over.

 

I am glad that they are making these reports in the media, might keep more meddling by APRA away from us for a little longer.

 

This may be a little controversial but I'm wondering whether the changes that APRA has made are actually a good thing. I do agree that it should have been a more targeted approach to tackle some markets in Melbourne & Sydney. But I'm interested in what people think about these changes

On the positive;

• Do they reduce the exposure of newbie investors that buy speculatively and are heavily negatively geared?
  
• Do they reduce the risk of a 'bubble burst' scenario in markets like Sydney, Melbourne (so we don't replicate what happened to some parts of the US and Europe?

On the negative;

• Blanket approach means they unfairly impact markets where investor activity should be encouraged to construct more dwellings

Thoughts......

 

Because all APRA did was hurt domestic investors. Cashed up foreigners or those with foreign sourced funds are not affected by the changes.

 

I would be interested to see the first chart compared with one from the same month last year... could be seasonal?

3% market share for investors in SA, surely that can't be accurate?

 

One has to wonder, what if investors became as active in the Adelaide market as in the Brisbane market?

 

Won't happen unless Adelaide improves it's economy quite a bit.

 

Agree but there will be no more "oi china, buy real estate in oz cos its guaranteed to boom" type hype.

So maybe foreign investment will drop too

 

That's not entirely accurate. LVR's for non residents have been reduced, and FIRB enforcement is actually starting to be enforced... Neither of these things will stop non resident investors, but they will slow it down a little.

 

Which is irrelevant since they are likely not sourcing funds here and sure FIRB are taking a more proactive approach but their efforts still seem tiny.

 

One point to be noted is that, in particular buyers from mainland China, if they are not Australia permanent residents, they will be cash buyers, no domestic policies will affect them. The housing price in oz comparing with china (mainly Beijing, Shanghai and some well developed major cities) are not comprehenable, good value in oz.

 

It cant be tiny AND be irrelevant.

RE the FIRB enforcement improvements - It will take quite some time for them to show any real impact. I think what many people don't understand is that until just 3 months ago, this is an organisation that had less than 10 fulltime staff ( including a CEO) to monitor the whole country! Incredible, isnt it? Not 100 staff. Not 50 staff.... less than 10. It would be one of the great understatements to suggest they were under resourced. Now they are finally staffing up and getting up to speed , but it will take many months yet before they are in the market and their presence is being felt.

RE the assumption that non residents mainly source their funds o/seas - there is no evidence to support this. But there is significant evidence that many non residents borrow in Australia. What evidence? Well, I have years and years of BDM experience, and know literally hundreds of brokers, and many aggregators. Within those groups there are multiple ultra successful mortgage brokerages that focus very heavily on non resident lending. These companies write massive volumes of non resident business per year and they overwhelming rely on Westpac as their preferred choice. Westpac has over 65% of the non resident particular market in fact, by most aggregator estimates. Most aggregator groups have at least 1 or 2 of these types of brokerages in each state. Some of the larger groups like AFG, Connective etc have many more. I personally know many of theses businesses and the big loan writers within those businesses. I can tell you from very recent first hand discussions with some of those people, with Westpac not as open for investor business as they were a few months ago, the changes are most definitely being felt.

Within my own business, where I do significant business in Indonesia and Malaysia for example, I can tell you the same. Getting finance for non residents is MUCH harder now.

 

huh? irrelevant was to your LVR comment and tiny was to your FIRB comment. Not related.

 

The market is still hot and bargains are still hard to come by.
In terms of investors looking at buying, there are still investors buying, especially the ones who have low LVRS.

 

Sydney anf Melbourne a bit..but not so much the other state capitals. Sydney and Melbourne will continue to be supported by overseas money. It's still cheap for them, compared to HK, Singapore etc..

 

There's an article at Domain comparing property prices for various major cities. And it turns out that luxury property in Shanghai is a bit cheaper, whereas Singapore is slightly more expensive.

Here's the graph of price per square metre at the expensive end of various global cities.


I think that a lot of people are comparing (for example) a $30,000 per square metre price tag in the priciest parts of Shanghai or Singapore with somewhere in darkest Mt Druitt, and thereby claiming that overseas buyers see Australia as being cheap.

I also think that there's an exaggeration of the wealth in China. There were estimated to be around four million millionaires there earlier this year. The numbers are likely to be down with the falls in the stock market, as this had boosted numbers from three million in 2014. But you hear stories about how everyone in Shanghai is loaded.