Australian Property Investor Lending Falls by Nearly a Third
New lending to Australian property investors fell by nearly a third in the September quarter, the biggest drop in official records dating back to 2002. The decline came as Commonwealth Bank mortgage arrears reached a 12-year high and lending to first-home buyers also fell.
New lending to Australian property investors fell by nearly a third in the September quarter, the biggest drop in official records dating back to 2002, as lending property investors falls amid tax changes and higher borrowing costs. The Commonwealth Bank also reported that the share of customers at least 90 days behind on mortgage repayments reached a 12-year high.
The Australian Bureau of Statistics said investor loan values recorded their steepest quarterly decline since its records began. The fall was nearly double the previous largest quarterly drop.
Across all new loans, lending fell 15% in the quarter. Loans to owner-occupiers declined 5.3%, while lending to first-home buyers dropped 8.6%.
The Commonwealth Bank said the proportion of its borrowers 90 days or more behind on repayments rose from 0.73% to 0.8% of total lending. The last time arrears were higher was in 2014.
Jim Chalmers, Australia’s treasurer, defended the government’s housing tax changes as the data showed investors retreating. The May budget introduced changes to capital gains tax for investors and ended negative gearing for new landlords purchasing an existing home.
“Our tax reforms are all about helping more first home buyers into the housing market and we expect to see those benefits play out over years, not months,” Chalmers said.
Mish Tan, head of finance statistics at the Australian Bureau of Statistics, said investor activity appeared to be responding to factors beyond higher borrowing costs, including possible tax changes and expectations of lower house prices.
New loans to investors building homes fell 12% in the quarter. The decline in first-home buyer lending also pointed to would-be buyers staying out of the market amid rising rates and concerns about property prices.
Nathan Zaia, a senior equity analyst at Morningstar, said mortgage arrears were rising across the banking sector and “probably hadn’t peaked”. He said the recent increase followed a prolonged period of unusually low arrears.
Nico de Lange, director of financial institution ratings at S&P Global, said the rise in missed payments had not yet brought significant stress to the banking sector as a whole. He said analysts were watching closely after five interest rate increases this year.
Andrew Bragg, the opposition Coalition’s housing spokesman, criticized the tax changes, saying they were discouraging investment when Australia needed more homes. The Coalition has promised to repeal the measures if it wins government.
