Lending for new property tightened further over December, new ABS data suggests, with analysis claiming this can be “quickly” reversed.
Housing finance commitments for construction and purchasing of new property dropped by 3.4 per cent over the month of December, according to ABS data, which is 13.4 per cent lower than in December 2017.
ABS chief economist Bruce Hockman said investor finance has remained relatively consistent since 2016.
“The slowdown in lending for investor dwellings this month continues the steady decline over the past two years, with the value of new investor loan commitments down around 40 percent from the peak at the start of 2017,” Mr Hockman said.
Tim Reardon, principal economist at the Housing Industry Association, said that as a result, this has led to the building market to cool.
Its impact on investors, however, is expected to see a rapid reversal after the market sees stabilisation.
“Lending to investors is now 47.8 per cent lower than at its peak in April 2015,” Mr Reardon said.
“This decline in investor activity will turn around quickly when home prices stabilise.”
Looking to the long term, Mr Reardon said the market is still solid, but unemployment rate and population growth are still at critical levels.
“The slowdown in the market began with restrictions imposed by APRA on investors several years ago and has been exacerbated with tighter lending conditions imposed by banks during 2018,” Mr Reardon added.
“The banks have tightened lending requirements throughout 2018 and this is impacting on investors.
“This downturn is long been forecast but there are ongoing risks regarding its length and depth.”
With interest-only loan restrictions on lenders lifted from last month, some of Australia's top mortgage brokers are confident it won't be as tough to secure financing in 2019 as it was last year.
“The positive impact will be the ability for existing interest-only mortgagors, specifically investors, to refinance to another interest only loan,” said broker and managing director of Sydney-based Atelier Wealth Aaron Christie-David.
Big names in banking also foresee a more competitive mortgage market in 2019 in light of APRA easing off on interest-only loans.
Australian Banking Association CEO Anna Bligh said the decision “will mean all banks can offer more choice for customers who are looking to buy a house or apartment”.
“Increased competition across the industry will mean customers have more ability to shop around for the best deal for them when looking at an interest-only home loan,” she said.