Investor lending is shrinking as approvals for new apartments rebounded in September. (REUTERS/Tom Westbrook/File Photo)
Another day, another batch of mixed messages in the housing market, with investors still reluctant to borrow and another big parcel of apartments approved for construction.
- Growth in investor lending is the the weakest on record
- Business lending also remains subdued despite record low interest rates
- Building approvals lifted sharply in September on the back of new apartment projects
September's lending data from the Reserve Bank shows overall lending continuing at a sluggish pace, with annual credit growth of 2.7 per cent the lowest since 2011.
Home lending grew by 3.1 per cent, but this was entirely due owner-occupiers.
"Owner-occupier housing credit increased by a further 0.4 per cent or 4.8 per cent over the past year, which is the smallest annual increase since 2014," NAB economist Kieran Davies said.
"In contrast, investor housing credit fell a further 0.1 per cent and is now marginally below the level of a year earlier.
"These declines mark the first sustained decline in investor credit since data became available in 1990."
The subdued appetite from business for loans continued through September despite very low borrowing costs, while personal credit is even weaker, down 0.7 per cent in the month and 4.4 per cent over the year.
The weakness in new lines of personal credit is reflected in weak sales of large household items, such as new vehicles.
Investor credit growth for investors is the lowest since RBA data started. (Supplied: J.P. Morgan)
RBA wants businesses to borrow more
Earlier this week, RBA governor Philip Lowe urged business to advantage of the record low interest rates to help stimulate a broader economic recovery.
"At low interest rates, many investments that didn't make sense at higher interest rates should now make sense," Dr Lowe said.
It is an idea ANZ chief executive Shayne Elliott has taken on board.
At his bank's annual results briefing, Mr Elliott said ANZ management was currently considering lowering its hurdle for investment, with the current cost of capital benchmark of 10 per cent cut to around 8.5 per cent, or lower.
But Mr Elliott also noted the global regime of low interest rates was not without risk.
"Credit conditions are benign, but will inevitably turn at some point," he said.
Building approvals jump
While lending may be weak, building approvals took a surprising jump in September.
Most of the growth was driven by permits issued for high-density apartment construction (+16.6 per cent).
Approvals for detached residences also had reasonable gain (+2.7 per cent) after previous monthly declines.
JP Morgan's Ben Jarman said the September bounce was probably more a result of "standard volatility than a new dawn".
"Building approvals have been very weak lately, with the annual rate at -19 per cent over the year, and levels down 39 per cent from the peak of the cycle around two years ago," Mr Jarman said.
He said the rebound in house prices of late will help stabilise the home-building outlook over time, but it is unlikely the slowdown has bottomed out.
"The lags from better price outcomes, the weakness of bank lending for new build, and the significant pipeline of homes still to be completed and sold suggest that the turning point in the home construction cycle is still some way off," Mr Jarman said.
Rising dwelling prices are eventually likely to support and upturn in construction. (Supplied: J.P. Morgan)