May records biggest monthly drop in mortgage lending in 5 years

July 11, 2015 admin Australian Economy, Australian Housing, Banking Regulation, Monetary Policy 36

The number of new mortgages to owner-occupiers tumbled a seasonally adjusted 6.1 per cent in May, the biggest fall in 5 years according to Australian Bureau of Statistics (ABS) data released on Friday.

The value of loans written to investors fell 3.2 per cent, while owner occupiers slumped 5.3 percent. Regulators had been targeting the overheated investor segment, forcing banks to tighten lending to limit further damage from Australia’s housing bubble.

Economists were surprised to see such a large fall, the same month the Reserve Bank slashed the official cash rate from 2.25 per cent to just 2 per cent, a new record low. Many were also surprised to see a larger fall in the owner occupier segment, a segment not being targeted by macroprudential regulation. Following the Reserve Bank announcement in May, Treasurer Joe Hockey pleaded, “I say to the Australian people directly, now is the time to borrow and invest, whether you be a household or business.” It’s possible many Australians saw through the Treasurer’s plea, fearing a deteriorating economy and have decided to suspend purchases instead. (Treasurer Joe Hockey delusional as RBA cuts to record emergency lows‘)

The figures reported on Friday correspond to the month before Treasury secretary John Fraser told a Senate enquiry Sydney and some parts of Melbourne are “unequivocally” in a housing bubble. (Treasury secretary John Fraser says Sydney ‘unequivocally’ in a housing bubble‘) According to Google Trends, concerned Australian’s conducted a record number of searches on the property bubble during the month of June. (June 2015: The month Australia learned it had a housing bubble‘)

This week, Westpac and ANZ reduced maximum LVRs for new loans to property investors to further cool the market. (‘Banks continue to curb investor lending‘)

Hence, it is expected to see a further deterioration in lending data in the next coming months.

» Home loan slide an early sign that APRA limits may be working – The ABC, 10th July 2015.
» New mortgage lending falls 6.1pc as banks toughen policies – The Age, 10th July 2015.
» Home loan approvals at two-year low – News Limited, 10th July 2015.




36 Comments

  3. With the corrupt and incompetent Hockey encouraging people to get into more debt and Abbot being a supporter of drug dealers as he did with those who were executed in Indonesia recently and having them still in power is testimony to political poor judgement, indifference, apathy, ignorance, illiteracy etc. etc. of the voter. I am horrified and terrified at the thought of this country’s social and economic welfare is in the hands of this person.

  4. @Theo

    As the saying goes “The people always get the Government they deserve” The Romans believed all you had to provide was enough bread and circuses (now beer and sports) Apparently revolutions only occur when the majority of the population has to spend more than 40% of their income on food. So until the “let them eat cake” moment, reality shows and tattoo parlours will continue to do well and the sheeple will continue to think their homes will make them wealthy and that they will have plenty to retire on.

  5. @ 4. Yep Morpheus summed that up nicely.

    IT would seem John Fraser’s comment about the bubble may have finally shocked home owners into taking a step back. However one month on its own isnt going to mean much. It remains to be seen whether this trend of falling mortgage loans continues over the following months also, and if it does, this could be the tipping point for the long awaited corrections that are long overdue. It wont take the herd long to join the stampede, and the Chinese with be joining it too considering whats happening to their stock market.

  6. @Titty. The figures are for May. It wasn’t until the 1st of June, that John Fraser said Sydney was unequivocally in a housing bubble.

    I agree, it’s only one month. June’s figures are going to be interesting and will paint more of a picture.

  7. Don’t get too excited everyone. Housing topped in 2005 in USA, yet it took until 2009 for the full force to be felt.

    This will literally feel like a slow motion train wreck.

  8. @Matty
    I don’t think this will last that long mate. The U.S. economy was not solely leveraged on a commodities bubble.
    In WA it is starting to get interesting! No NAFTA to cushion this shithole!

  10. Richard Hoskins:When typical 6% interest rates begin compounding debt over time,due to lack of enough money to pay the existing debts,the debt-plagued native population of a given country stops reproducing due to the heavy cost of living.This in turn leads to the influx of immigration of foreign peoples.Hoskins states that mass immigration is an absolute necessity for any usury-based system since new money must always be borrowed into existence.Immigrants represent new,debt-free borrowers and bank customers.The net result of a usury system is the complete slavery at some point when the people cannot pay their debts.First usury causes high prices(inflation},then heavy debts,a landless people,lower birth rates and declining population,and finally immigration of new peoples needed to borrow money into existence and pay taxes.Therefore a debt-free potential borrower is of far greater value than a heavily indebted native citizen.

  11. @10

    And not struting around declaring “I will not work for the amount of pay. I”M WORTH MORE”

  13. 56andoverit,
    Interesting discussion by Richard Hoskins to link debt issues to immigration, which may inflate the debt to next stage with profound side effects.

  14. With the dramas that are going on with the Chinese stock markets, I am reading that even more wealthy Chinese want to park their money into Australian Real Estate (especially Sydney and Melbourne.

    In todays Sydney Morning Herald (13/07/2015), I read an article where some wealthy Chinese investors, want to buy a whole block of apartments, not just one.

    It seems the government, both state and federal are obsessed with inflating this property bubble even further and further.

  15. This country’s economy is slowly becoming a medieval Feudalistic economy where the 1%-ers own the lands and businesses and the rest 99% do the hard work and serve them for the rest of their lives. To be honest I was a skilled immigrant 11 years ago when I came here and since then the situation deteriorated faster than I thought. Regretting my move here in Australia as a Hi tech engineer. Education and literacy and intelligence in this country is not paying off. I had to be a lazy speculator doing exact nothing except living on the backs of youth leeching the whole society to pay me an unearned living, dodging the tax system and choking the whole economy. Really there is better time to start looking to another promising land that appreciate Science and Engineering over lazy unproductive investing in bricks. I have to look to my kids in the eyes and confront them with what the heck I did to their future. I am terribly Sorry kids

  16. FIRB – where are you? Your inaction in doing anything about the unlawful ‘parking’ of Chinese money in Australian real estate will utterly cripple this country.

    I say to the Chinese, if you need to get your money out of China, then please invest in businesses and renewables and infrastructure and education – but for goodness sake, leave Australian homes for Australian residents!

  17. Do yourself a favour, if you can get another passport then get one. I know the rest of the world has its own problems but at least you can bury yourself with some new scenery and another opprtunity. I don’t have all the answers. I think this country is disappointing on many levels. Nothing is real anymore. I wish you all good health and prosperity but nobody should have to deal with this circus of a country….absolute shame what goes on here….totally disgusting. Country full of con artists.

  18. Here’s what wrong with the joint and why it will only get worse,
    Everyone here will answer in their own heads.

    I’m thinking of starting a fruit orchard farm. Lots of land and people to feed right? If it could be done in 1890 then it should be a snap? NAH!

    Or what about we create a car from design scratch to the road, what about aircraft, a computer industry? What about making clothes from great cotton or wool? What about a private satellite launch industry or even design/build and export Australian submarines.

    If you like a challenge you could lease a commercial space in Sydney and open a $2 shop. Try living of that.

    NUP. We have squandered the past, the future, the lot. We are greedy and we are stuffed.

  19. Compound interest is infinite and most money is put into circulation by banks at interest in the form of debt.As a consequence more and more debt is needed to keep the economy afloat.Without interest on money,debts cannot grow because of interest,while every down payment reduces the principal.Therefore debts are less likely to grow out of control.

  20. @ Rupert

    Be careful what you wish for. The businesses are already here and growing exponentially. The problem is that they are mainly fronts for employing illegal immigrants or Asian crime syndicates. They are usually service businesses and can be found in most shopping centres displaying “cash only” signs (No tax paid). They create no local employment and support high retail rents due to their low operating costs. These shadow industries contribute nothing to the economy while using the freely provided infrastructures and channelling cash back to their countries of origin. Local authorities know they are there but prefer to ignore the problem as does the FIRB.

  25. @Jay
    The weak laws regarding foreign purchase of Australian real estate are very easy to get around. Even though foreign nationals are not permitted to purchase existing properties, only new off the plan ones, what they do, is that get a relative or trusted friend who is an Australian citizen to buy the property in their name.

    Also many of these cashed up Chinese are walking into real estate agent offices with cash (mostly likely dirty money), and I bet my life the real estate agents are not asking where the money came from. Like the old saying goes:

    “Money talks, bull_ _ _t walks”, if you flash around enough money, people will conveniently look the other way.

    @Bubbly
    Don’t hold your breath with Joe Hockey, I believe he comes from a real estate background, so he won’t do anything to hurt his mates.

  27. i have been putting a lot of thought into what hockey is doing,at first i thought he was just another baffoon but the more i looked into it it might just seem hockey and abbot are geniouses…i recon hockey and abbott know full well its a massive bubble,and not of their causing and they know a collapse is comming.what i think they are trying to do is get as much chinese money comming into the country as possible (chinese money is cash not oz bank loan money which would leave the banks vonerable if a crisis happpened)i think they know its going to be bad but at least chinese money wil cushion the blow thats comming.

  28. Apparently the treasurer’s financial guru is Mrs Hockey (ex Deutsche Bank) who predicted the GFC and sold all their assets prior to the last crash. So presumably he knows about the NEXT crash (selling the farm) but is not doing anything to repair a broken financial system and is only intent on saving himself ….. and the banks.

    http://www.heraldsun.com.au/news/treasurer-joe-hockey-and-financial-guru-melissa-babbage-have-a-very-modern-political-marriage/story-fni0fiyv-1226645854591

  30. @average block..
    you do know who owns Domain don’t you….anyway people will still buy…good for them, I’m happy watching and I have a good seat.

  31. @29:

    “Abolishing the negative gearing rules for property would cause a market distortion, not cure it.”

    He acknowledges it distorts the markets then.

  33. The Domain article and other similar propaganda sites never factor in the cost of a house compared to the minimum wage. The ACTU has sold us out in that area. Also, the guy is an associate professor. He will never be a professor on his own as no serious educational institute will give him a position. They would not stand the humiliation and ridicule.

  34. Don’t worry about the cost of housing that will be the least of our problems. The article “Is Australia the next Greece”? details our increasing indebtedness and our similarity to Greece. With our Debt/GDP at 60% and China slowing down dramatically our one trick pony of an economy is likely to start trotting backwards.

    http://www.zerohedge.com/news/2015-07-19/australia-next-greece

  36. Who were the economist that were surprised by the fall by owner-occupiers? The same clowns that have the ear of the government? Falling rents, overpriced houses, lack of job security and stagnant wages yet they think cutting the rate would have a significant positive impact? We are at the limits of what Australians can invest in housing as shown by the massive debt levels, I don’t know who they think is going to continue driving this growth because the first home buyers certainly aren’t interested.

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