Sharp decline in investor lending betrays a cooling housing market

Property Prices

A dramatic decline in investor lending last month shows further signs of a cooling housing market.

It was the second month in a row of sliding housing finance, falling by 2 per cent in October, and investor lending specifically dropped by 6.2 per cent.

Investor lending is now down 9.2 per cent for the year.

Investor lending has been under downward pressure for some time now after the Australian Prudential Regulation Authority put a 10 per cent limit on loan growth and clamped down on lending standards at the same time.

Gareth Aird from the Commonwealth Bank told that these sorts of figures really confirmed that the investor lending boom was over.

“We expect further moderation to come over coming months in line with the downtrend in auction clearance rates and anecdotal reports of waning investor interest in property,” Mr Aird said.

“In our view, without any further rate cuts, growth in the average loan size should start to plateau and move more into alignment with income growth.”

“This has implications for dwelling price growth which has cooled over recent months.”

RBC’s Michael Turner said credit growth was slowing and house prices will follow the trend.

“A cooling housing market and less impetus from residential construction are likely to be weighing on growth by the second half of 2016,” he told

“Some of this is likely in response to tighter regulation, but the natural cycle of the housing market is also at play. Prices have risen, supply is responding, and population has also slowed.”


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