Australia’s property cooling measures hit investor lending

Romesh Navaratnarajah12 Jul 2017

View of modern buildings in Melbourne, Australia

Lending to property investors Down Under fell 1.4 percent in May.  

Australia’s property cooling measures may have started to bite as home lending to property investors fell 1.4 percent in May – its second month in a row, reported Reuters.

Based on data from the Australian Bureau of Statistics (ABS), the value of cancelled loans also rose by around 17 percent to a 10-month high of A$1.44 billion.

Meanwhile, lending to owner-occupiers climbed by one percent, while loans for construction inched up for a fourth consecutive month.

“The home loan data had the right mix in May – more loans to budding homeowners and fewer loans to investors,” said CommSec chief economist James Craig.

The slowdown in lending will be a welcome news to the Reserve Bank of Australia (RBA), which has long worried that debt-fuelled speculation in property may eventually hurt both banks and consumers.

The RBA kept interest rates this month at an all-time low of 1.5 percent as household debt already stands at 190 percent of disposable income.

Policy makers, however, tightened rules on home lending, especially interest-rate only loans which are popular among property speculators.

The move forced banks to raise rates on interest-only debt in April and June. The hike in rates led to a moderation in home price growth, albeit it remains strong in Sydney and Melbourne.

In June, home prices in the capital cities climbed 9.6 percent year-on-year, down from its March peak of 12.9 percent. Prices in Sydney and Melbourne rose by 12.2 percent and 13.7 percent, respectively.

Nonetheless, economists believe it is still too early to say that the housing market has reached its peak.

“Auction activity and price growth show a material slowdown coming through, although both remain fairly mild to date,” noted Matthew Hassan, an economist at Westpac. “Given the banks made a second round of loan rate increases in June, a full picture is unlikely to emerge until much later in the year.”


Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email


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