The growth in credit for investors in residential real estate tipped over ten per cent in March, according to the Reserve Bank of Australia, leaping up from a year-on-year growth rate of 10.1 per cent the previous month to 10.4 per cent, after being just ten per cent, flat, in December.
Now some of the commentariat are speculating about whether the RBA needs to lower rates still further because of the risk to the economy this small sector of the market poses; or suggesting APRA should give the banks a severe talking to, and even impose rules to limit borrowing by investors buying into residential real estate.
Really?
True, APRA said it might act when portfolio growth was "materially" above a ten per cent "threshold" - but none of these terms have been defined. So for my money, we aren't anywhere near panic stations. Look at this chart from ANZ's senior economist David Cannington :
ANZ-property,March-2015
I'm not a big fan of the dark art of the chartists, but on a superficial reading this one seems to indicate the time for slower investor housing growth is nigh. If so, APRA might want to sit on its hands.
Does 10.4 count as "materially above" APRA's threshold when you look back and see quarterly changes of 14 or 15 per cent in 2006 and 2007, and much higher at the start of this century?
There's also been precious little hard analysis on why the growth in investor loans has been sitting at ten per cent for a few months. Here are a few thoughts, and I'll let readers join the dots:
- Rule changes have made it harder for owners of self-managed super funds to borrow and then invest in residential property through their SMSFs.
- Baby boomers continue to become empty nesters, and downsize, but remain in high paying jobs.
- There has been some talk of an end to negative gearing in the approaching Federal Budget.
Any extra dots that readers can provide to improve this analysis are always welcome.