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Home Owner Lending Has Picked Up 17pc Over the Quarter

Home Owner Lending Has Picked Up 17pc Over the Quarter (1)

ABS data on new housing credit shows a rise in the value of home loan commitments, driven by owner-occupier lending.

Since bottoming out in May, the value of new owner-occupier home loan commitments is 17.3 per cent higher, according to Corelogic. The rise in value of owner-occupier housing finance over the September quarter, up 12.1 per cent, was the fastest quarter-on-quarter rise since 2015.

While lending to property investors has been subdued, the value of investment loan commitments was up 6 per cent over the September quarter.

Investors are currently tracking at 24.8 per cent of the value of new mortgage commitments, Corelogic’s head of research Tim Lawless says investors now comprise the lowest portion of housing loan commitments since the ABS records began in 2003.

“In contrast, shortly after the first round of macro-prudential rules were introduced in December 2014, investors comprised 43 per cent of national mortgage demand,” Lawless said.

The data shows mortgage activity is finally showing to pick up across Western Australia, with the value of owner-occupier lending up 15.8 per cent over the September quarter, and the value of investor loans up 24.1 per cent.

In New South Wales the value of owner-occupier loan commitments was up 12.3 per cent over the period, compared with a 3.3 per cent rise in investment.

“Although investment credit growth is slower, NSW has the largest concentration of investment activity across the states, with investors comprising 30.5 per cent of mortgage demand based on value,” Lawless said.

The value of owner-occupier home loan commitments was 11.3 per cent higher over the September quarter in Victoria, compared with a 10.6 per cent lift in lending to investors.

Victoria is home to the second largest concentration of investors, with 25.2 per cent of mortgage demand in September.

The value of investor loans in Queensland increased 12.5 per cent over the September quarter, compared with an 8.4 per cent lift in owner occupier lending.

Corelogic’s home value index shows national dwelling values bottomed out in June this year, the same month that housing credit started to rise.

“The improved credit flows have been supported by APRA’s decision to relax borrower serviceability rules, as well as the lowest mortgage rates since at least the 1950’s,” Lawless said.

 

 

Source: theurbandeveloper.com

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Finance

Australia Maintains AAA Credit Rating

Australia Maintains AAA Credit Rating (1)

Moody’s says Australia’s economic strength will continue to underpin the AAA rating, notwithstanding the deep economic shock caused by the coronavirus crisis.

Australia is one of only 10 countries to retain the triple-A status, which impacts on the cost of borrowing by state governments and banks, from three leading credit rating agencies.

Moody’s stable outlook reflects its forecast that downside risks to the credit profile are contained by the “underlying resilience of the economy” and Australia’s “effective policy-making institutions”.

Treasurer Josh Frydenberg said that the rating was reflective of the federal government’s economic response to the pandemic, with $260 billion—or 13.3 per cent of GDP—injecting the economy in response to Covid-19.

Australia Maintains AAA Credit Rating (2)

The latest assessment from Moody’s means all three major ratings agencies, including Standard & Poor’s and Fitch Ratings, puts Australia as one of only 10 countries to have a triple-A rating.

But the health-turn-economic crisis will take its toll, Moody’s expects GDP to fall by around five per cent in 2020.

“While large, the fall in GDP is smaller than in other advanced economies in general, consistent with signs that more normal work and spending behaviours are gradually returning as the epidemic recedes in the country.

“In Moody’s assessment, the resilience of the Australian economy supports a return to positive growth next year, without any significant long-lasting impact on growth potential once the crisis passes.”

Australia entered the coronavirus pandemic with a relatively moderate debt burden, which Moody’s says offered the scope to implement major fiscal policy support.

Moody’s still forecasts Australia’s general government debt burden to rise to above 50 per cent of GDP in the fiscal year ending June 2021. This is up from 41.8 per cent in fiscal 2019. Moody’s expects further modest increases in the following years.

“While such a debt burden would be Australia’s highest in several decades, it would also remain consistent with other Aaa-rated sovereigns, most of which are facing a similar sudden debt shock,” Moody’s says.

“Compared to other advanced economies, the initial jump in the debt burden is likely to be less large for Australia due to a somewhat less acute fall in growth.”

Earlier this month, Frydenberg conceded the nation would enter its first recession, breaking a 29-year run.

Australia’s economy contracted 0.3 per cent in the March quarter and is likely to contract around 8 per cent in the June quarter.

The World Bank estimates that 90 per cent of global nations are expected to experience a recession over the first half of 2020.

CommSec chief economist Craig James said Australia is ending the 2019 financial year with a cash rate of 0.25 per cent, unemployment rate at 7.1 per cent and underlying inflation rate at 1.75 per cent.

 

 

 

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

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Finance

Rate cut may fuel red-hot property market

Rate cut may fuel red-hot property market

Cuts to interest rates will "throw fuel on an already raging inferno" that is Australia’s housing market – leading to fears of an inevitable crash.

Australia’s property market has nearly entirely rebounded from its correction – and with the RBA’s rate cuts this week is now a “juggernaut” that even the coronavirus will not be able to stop, one expert says.

“I’m not even sure that the bubonic plague would slow down the property market at the moment,” said Starr Partners chief executive Douglas Driscoll.

“The market is a juggernaut at the moment, a high speed train,” Mr Driscoll said, adding that the major banks passing on the RBA’s rate cut in full would only bolster it further.

“I think it’s tantamount to throwing fuel on an already raging inferno,” he said.

The nation’s biggest lender, Commonwealth Bank, says its standard variable rate for owner occupiers paying principal and interest will drop to 4.55 per cent on March 24 – one of the lowest rates on record.

Smaller lenders were advertising mortgages at rates as low as 2.59 per cent, according to Savings.com.au.

McGrath chief executive Geoff Lucas said he disagreed with commentary that because interest rates were so low, another rate cut wouldn’t make much difference.

A 25 basis point cut from a lower base is actually more significant in percentage terms than a cut from a higher base, he noted.

“It’s quite a significant move, that will further underpin buyer demand,” he said.

Australia’s nationwide rental yields are around 3.8 per cent and interest-only loans are available to investors at in the low three per cent range, Mr Lucas said.

Mr Driscoll said that Australia’s property market had been picking up since around midway last year after the 2017 downturn, something he credited to both the RBA’s rate cuts in June and July and the May federal election result.

Typically property markets plateau for a bit after reaching their nadir, but not this time, he said.

“It can without exaggeration be described as a wild swing,” Mr Driscoll said.

“It was almost overnight, it was bizarre, it was crazy.”

A year ago vendors would struggle to get anyone to an open home, and now there are crowds, if “not quite queues around the block,” he said.

CoreLogic head of Australian research Eliza Owen said the market had nearly completely recovered from the correction in 2017, which came after strong growth in Australian property values from 2012.

Housing prices in five of Australia’s eight capital cities – Melbourne, Adelaide, Hobart, ACT and Brisbane – hit record levels in February.

In Sydney they grew 1.7 per cent to $872,934, which is still 3.7 per cent below the city’s peak, but it could reach it as soon as April, Ms Owen said.

In Melbourne, house prices rose 1.2 per cent in February – up 10.7 per cent for the year – to $689,088.

In Brisbane, house prices rose 0.6 per cent to $503,265, the CoreLogic figures show.

Unlike the last housing boom where 40 per cent of buyers were investors, this one appears to be more driven by owner-occupiers, she said.

Just 29 per cent of buyers have been investors, Ms Owen said.

Mr Lucas said that inventory was still low and there still wasn’t as much activity as in the last cycle.

Mr Driscoll said he worried that the boom was unsustainable and there would be another crash.

Buyers needed to realise that they were looking at not just once in a generation interest rates, but perhaps once in a lifetime interest rates, he said.

They should make sure their budget allows for the possibility that rates would rise.

 

 

 

This article is republished from www.news.com.au under a Creative Commons license. Read the original article.

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Finance

RBA Cuts as Coronavirus Clouds Outlook

RBA Cuts as Coronavirus Clouds Outlook

The spectre of the coronavirus outbreak loomed large over the Reserve Bank’s meeting on Tuesday, with the board cutting the cash rate by 25 basis points to a record low 0.50 per cent.

With uncertainty remaining as to how persistent the effects of COVID-19 will be, Lowe said the board had taken the decision to help protect the economy.

“The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors,” Lowe said.

“The uncertainty that it is creating is also likely to affect domestic spending.”

With the virus clouding the near-term outlook for the global economy, meaning global growth in the first half of 2020 will be lower than expected, the move is in line with policy measures announced in several countries, including China, to help support growth.

Lowe said the unpredictable nature and duration of the “evolving situation” made it difficult to predict how large and long-lasting the effect will be.

“The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target,” Lowe said.

“The board therefore judged that it was appropriate to ease monetary policy further to provide additional support to employment and economic activity.”

Commsec chief economist Craig James said today’s decision was “all about the coronavirus”, with the ball now firmly in the Australian government’s court in terms of outlining a fiscal response.

“The Reserve Bank is all but spent—it is debatable that today’s 25 basis point move will do much to boost growth,” James said,

“The Australian government has more firepower given that the budget is broadly balanced. The aim must be to prevent the economy from slipping into recession – an event that would have longer-lasting effects.”

The Reserve Bank remains positive about future prospects for the economy once the coronavirus is contained, with Lowe predicting a return to “an improving trend”.

“This outlook is supported by the low level of interest rates, high levels of spending on infrastructure, the lower exchange rate, a positive outlook for the resources sector and expected recoveries in residential construction and household consumption,” Lowe said.

Lowe said that the Reserve Bank would continue to monitor developments closely and assess the implications of the coronavirus for the economy.

“The board is prepared to ease monetary policy further to support the Australian economy.”

Australia’s big four banks responded immediately to the decision, with major lenders CBA, NAB, ANZ and Westpac all announcing interest rate cuts.

 

 

 

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

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