While the Australian Prudential Regulation Authority (APRA) continues to skirt around implementing macro-prudential controls on risky mortgage lending, there is a bonafide investor bubble ripping through Australia’s housing market.
Today, I thought I would would take readers through a series of charts showing just how big this bubble has become, in a bid to highlight just how incompetent Australia’s financial stability regulators – APRA and the RBA – have become in managing Australia’s housing/mortgage risks.
First, the next chart plots the monthly value of investor mortgages against owner-occupied mortgages (excluding refinanciangs):
As you can see, the monthly value of new investor mortgages has more than doubled in less than three years and now exceeds that of owner-occupiers – the first time in history this has occurred.
Second, the next chart shows the percentage of total loans (excluding refinancings) going to investors and owner-occupiers:
As you can see, the current episode, whereby the investor share has hit a record 51% share as at January 2015, has eclipsed the 2003 bubble peak of 49%.
No worries, all these investors flooding the housing market are juicing construction, right? Well no. The share of total investor loans going into new construction was only 7% in January 2015, and has barely budged:
With the overall value of new construction from property investors still stuck in the gutter and barely above the 2003 ‘bubble’ peak:
This suggests that investors are buying up established dwellings en masse, rather than adding to housing supply – yet another policy failure of negative gearing.
The above figures are also supported by the RBA’s housing finance data, which shows the annual change in the stock of outstanding mortgage debt approaching pre-GFC highs, driven by record investor growth:
About the only thing this investor bubble has accomplished is inflating house values, as shown by the strong correlation between investor commitments and house price growth below:
Get off your arse APRA. Do your job, and rein in this ginormous bubble before it further destabilises Australia’s financial system and economy.
