Total lending falling despite housing bubble

By Leith van Onselen

Today’s Lending Finance data, released by the ABS, revealed that total lending continued to fall in December and is well past its peak.

The below charts, which track lending on a trend basis, illustrate the current state of play.

First, total finance commitments peaked in June 2014, and have been trending down ever since, down 8.6% since June:

ScreenHunter_6062 Feb. 13 12.04

The overall fall in finance commitments has been driven by commercial, where the value of commitments has fallen 15.7% since June 2014:

ScreenHunter_6063 Feb. 13 12.05

The fall in commercial finance commitments is curious given they include loans to investment properties, which have been booming (see my earlier post on the Sydney investor bubble). This suggests that loans to other commercial enterprises –  the productive economy – have fallen fairly sharply.

Most of the other components of lending have also been weakening. Housing renovation activity has fallen for four consecutive months and is down 4.5% since June:

ScreenHunter_6065 Feb. 13 12.14

Lease finance commitments have been falling sharply, down 11.8% since June:

ScreenHunter_6066 Feb. 13 12.15

Whereas personal finance commitments have plateaued, up only 1.5% since June but falling over the past few months:

ScreenHunter_6067 Feb. 13 12.19

The notable exception to all this is owner-occupied housing finance commitments (excluding renovations), which hit a new record in December, up 4.8% since June:

ScreenHunter_6064 Feb. 13 12.09

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Comments

  1. Good stuff Owner Occupiers! Exactly what the good governor wants. Other borrowers need to start pulling their weight!

  2. No matter “Everything is Awesome”

    But seriously

    I like how the fall in total lending is on a par with the lead up to the GFC. I would love Mr Keen to respond to that post given the implications for rate of change in growth of debt and the large correlation it has to employment.

    The data also looks similar to the period leading up to the 91 recession/financial crisis. The muppets were still loading up on investment loans, though underneath the real economy was falling into a pit.

    This is the begining of the end. The come to Jesus moment will be Xmas 15

  3. Where is Steve Keen to offer his august but academically incomprehensible commentary when you need him?

    • And risk the government kicking off a fresh round of FHOGs like last time?
      Lay low for now Steve, dissect the corpse afterwards.

      • yes, exactly

        he bet everything on a false perception and ignored data he had no access to

        even when told point blank he was missing the big picture

        that’s what happens when you try and base one country’s economy on another’s

        if you forget to examine the effect of massive migration by people holding lots of money relative to Aus land prices then your model is just bunk

        and betting his own home on his false perception just made him look all the more silly

        p

      • Steve Keen will pale into insignificance when you take the crown mate. Talk about setting yourself up……

  4. I think this is actually good news for everybody not totally self absorbed in the capital city markets. There will be a value crash, no question, but setting fire to investment markets in Sydney/Melb/Perth/Brisbane will leave the rest of us unscathed. Sucks to be you capital city numpties.

    • Are all four of those named capitals involved or just two or possibly even one (certainly one seems to lead the pack by hefty margin)?

      • If I was going to take a guess, I would say Sydney is the stupidest place on earth. Perth is going to be under immense pressure as people realise they can’t pay the mortgages on their rentals once they lose their mining construction job (will take another 3 months). Brisbane lags a bit but coal mining will self destruct and another set of FIFO workers will lose their shirts. Melbourne I have no idea about, I am guessing migration and a levelling out effect is taking place there i.e. they are just following the pack.

      • ErmingtonPlumbing

        Thing is that Sydney still pays the highest hourly rates in the country if your a tradie and there is always work even after the frequent building industry busts, even though overtime dries up during such periods for wage guys.

        Though the the 130k/a I’ve been pulling at cloudbreak for the last 3.5 years has been an easy, guaranteed income, allowing the wife to stay at home till the kids are in school which they now are, the hourly rate paid to the plumbers and sparkies I meet on site is much less than the going rates in Sydney.
        the higher p\a income coming only from the insane hours worked at a flat , lower rate.

        Though a correction seem certain in Syd I don’t see a collapse coming like in Port Headland or Newman (caused really by the laying off of only a few hundred people in the case of Newman)

        I got laid off with all the other 17 first year tradesmen in 1991 (finishing the new international airport terminal) and although the jobs going during that recession period were quite often quite crappy (literally), being Sydney there was always work available for those driven to maintain their required income.

      • @ErmingtonPlumbing

        It may be like that again in Sydney. I was a plumber in Melbourne at that time and its was much much harder. Victoria lost its biggest bank gone! poof # and of course Pyramid was backstopped by the taxpayer.

      • Can we all just reflect on what a great name ‘Pyramid’ is for a financial institution.

        Could say ‘losses were backstopped by the motorist’

    • many regional markets in these states will be affected too during a down-turn… especially regions full of holiday homes near said Capital cities.

  5. real productive economy capitulated

    it will be interesting to see how long it takes for the delusion to vanish

  6. Not everyone is borrowing it seems…

    Caught up with an old school mate at a poker game last weekend who has been a REA for the past 12+ years. (I use the term mate loosely, as he epitomises the stereotypical REA that I loathe).

    He told me a story of how an Asian lady asked prior to an auction if the vendor would accept a cash deposit in the event that she was successful in bidding.

    He went with her to her car where she had over $300k in a bag…… WTF…!!! 😯

    • No worries. The lady is dreamin’. Thanks to our big-4 banks you can borrow and match the lady’s bid any day.

      • This has been going on in the car dealership trade for 10+ years (in my experience).

        I remember a FOB coming into a dealership I used to be the account manager for with a 100K cash deposit in a briefcase for two Land Rovers back in 2006.

        The dealers don’t tell the police – they just start rubbing themselves under the sales desk.

    • Was it in AUD or USD ??

      Makes you wonder what bank would let someone take out 300k in cash without alerting authorities?

      Question – Isn’t there a rule somewhere that the Government is Automatically notified whenever someone withdraws more than 10K in cash?

      • But if the cash is AUD (not USD), it has to be withdrawn from somewhere when the person arrives? Or are you suggesting they first own a small business (take away, milk bar) and pocket all cash from the business first ?

      • many Australian Chinese need renminbi when they travel, want to help their family in China or want to invest in China.

        they give AUD so someone here, they get renminbi from someone there, no need for banks to be involved

      • ” Question – Isn’t there a rule somewhere that the Government is Automatically notified whenever someone withdraws more than 10K in cash?”

        I thought that “law” was only for payments and deposits not withdrawal’s

        Casino’s are a big one for washing dirty cash. Chinese big dick sends his wife and, say, 4 of her friends with just under 10k each to buy casino chips, get on the piss for a few hours, gamble a little and then cash in the 90% of the chips they brought as “winnings with a receipt please”

        With all this dodgey Chinese money flowing into Sydney, no wonder Packer wants in.

        And im thinking Young James needs to pull out of Macau before the Chinese bend him over , like his daddy did to Bondy.

        🙂

      • But if my money earned legally through working which you could track…why can’t I withdraw it and use as I please?

    • She was not the highest bidder in that auction either…. Someone must have had two bags of cash… :roll:

      And no, she wasn’t reported.

      Although my mate did say he did not think this madness in real estate could last and expected a correction in 12 months or so… Even thieving bastards can see the light I suppose…

      • I’d love to start a Fortune Cookie company with messages in them like “The Tax Office is Watching you”, the “FIRB knows about your secret properties”, etc.. Sell them at a street stall in Chinatown and watch the reactions of people as they open them… 🙂

      • Those messages don’t sound all that threatening.

        How about ‘The Party knows you stole their money’ or
        ‘Your parents still live in China – return what is ours’

  7. Given the downturn in mining and resource related investment the downturn in total lending is to be expected.

    The scale of the resource related investment (and the debt increases that financed it) was many times the current increase in construction.

    The net borrowing for purchasing dwellings is probably not much at all considering repayments by all owners with mortgages and most owners havng enjoyed the increase in their old property when paying more for the new one so the net difference isn’t that much for many people.

  8. The people through falling interest rates with real capital are being forced into the sharemarket and property market …..God help australia.