Andrew Bell’s Market Update: APRA – What Does This Mean For Real Estate?
Issue 20 | September 29th, 2016 | APRA – What Does This Mean For Real Estate?
LIVE from 27303 Ephraim Island, Paradise Point.
Ephraim Island is an exclusive upmarket residential island right in the heart of the Broadwater and one of only two islands that offer this unique lifestyle here on the Gold Coast. Located at Paradise Point, it’s adjoining the beautiful restaurant and cafe precinct at Paradise Point. This particular apartment is rare, a big three-bedroom of 255 square metres and it has complete uninterrupted views in an Easterly direction across the Broadwater to South Stradbroke Island National Park and beyond. It truly is one of the great views of the Gold Coast.
Australian Prudential Regulation Authority – The Pro’s & Con’s
Let’s have a look at the latest Australian Prudential Regulation Authority, better known as APRA’s, June-quarter data. It tells us a lot about what’s happening in the property market and addresses some of the issues that have been touted in the media and amongst researchers lately.
Looking at new lending in the June quarter, we see that there were $98.4 billion in new mortgages, which was made up of $64.4 billion for owner occupiers and $34 billion for investors. It was a record quarter with the value of lending 20.7% higher over the quarter and 2.1% higher year-on-year. Over the quarter, the value of lending to owner-occupiers rose 15.2%, whilst investor lending jumped 32.5% to its highest level since June 2015. Year-on-year owner-occupier lending is 16.2% higher, whilst investor lending is actually 16.9% lower.
The overall data shows that there has been a rebound in new lending to investors. The reason for this is that APRA imposed some regulations to limit growth in lending to investors to 10% per annum for the regulated banks, take note that that doesn’t apply to unregulated lenders. Banks worked hard in the early parts of the year to stay within these limits and hence the slump in lending in the early part of the year. Many banks now find that they are within the limits, therefore have the scope to dial-up their lending to investors, resulting in the growth that occurred in lending to investors during the June quarter. It’s really important to note that whilst lending has lifted over the past quarter, the data is showing there’s a more conservative approach to high loan-to-value ratios, better known as LVRs.
Is Lending Increasing or Decreasing?
Looking at the LVRs on new mortgages over the June quarter, it’s clear that lenders and/or borrowers are becoming more conservative and using larger deposits. During that quarter, a record high 78% of mortgages had LVRs of less than 80%, meaning that the deposit that they had put in was at least 20%. The report is also showing that year-on-year the value of lending for LVRs is less than 60% which is up 19.2%. That’s a huge growth in the more conservative lending/borrowing practice. By the way, the figures also show that the average outstanding mortgage balance across Australia is $252,100 which is 4.5% higher than in the year to June 2016.
The APRA regulations have led to another fascinating development, there’s huge growth in non-bank lending. Unfortunately, there’s no official statistics on this but anecdotal evidence suggests that private groups are lending Aussie companies and individuals billions of dollars each week to lend out on secured mortgages.
What we can see is that if the Big Four had continued to grow their investment housing lending book at the same average rate as they did in the 12 months ending June 2015, and before the new regulations, they would have lent an additional $68.4 billion. There’s pretty clear evidence that this gap has now been filled by the non-bank lenders.
Early Pain For Long Term Gain
Unfortunately, getting ahead in life usually means a little bit of sacrificing. Much of the younger generation are really big on travel, clothing, night life, cars and so on. A recent survey again by Mortgage Choice found that 69.4% of investors admitted to making sacrifices to buy property. They cut back on their day-to-day spending to achieve their property ambitions. I know many young couples who are working more than two jobs to stack away the cash to buy their first property. They are sacrificing holidays and lots of other lifestyle choices for a number of years in order to get into their first property. A little early pain for a long term gain.
For those desiring to get into their first home and for all of those who know people who perhaps should be aspiring to be in their first homes it is really important to take stock right now. Put a plan in place because you don’t want to be a tenant for the rest of your life and now is the time to make your move whilst there are these benefits available.
Have You Got The Best Loan?
This brings back the point that the Big Four banks have different drivers and shareholders that limit their flexibility in home lending. They’re actually proving, on so frequent occasion, to be the most difficult institutions to borrow from. No surprise that in a non-bank space, where there are over 100+ lenders, that there is more frequently much better lending criteria and most importantly better interest rates on offer. I know how tempted most of us are to stick with the Big Four banks when we’re seeking a mortgage, but as our Loan Market team leader, Phil Rogers tells us, he’s processing loans on a daily basis through the non-bank financiers on much better deals than the Big Four. If you want to do a check-in on your loans or if you’re seeking a new loan, contact Phil Rogers by clicking here.
It certainly is interesting data and it reflects the continued strong preference for real estate for so many investors as well of course demand from owner occupiers.
27303 Ephraim Island Parade, Ephraim Island
Take a look through 27303 Ephraim Island Parade, Ephraim Island. If you want more information then contact Glen Williams, our lead agent in the marketing of the property, he can send you a copy of the brochure or any other information such as open home times. It really is worth your while to inspect.
Just a few weeks until the “Ray White Surfers Paradise Business Lunch powered by Supercars”, which is a key event on the Gold Coast 600 calendar of events and it is a lunch on Thursday 20th October 2016 at the Gold Coast Convention Centre. It is a great way to entertain clients or award staff and it is always very entertaining. A great networking opportunity. We are limited in seating so if you would like more information contact Selena Carson our Event Coordinator on 0410 650 185.
Back to you in a fortnight’s time with more news about the real estate market. Stay safe.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group