Reduction in Investment Lending Softening the Market

Reduction in Investment Lending Softening the Market

Overall, the February housing market results marked a subtle improvement in the rate of decline. However, the housing market downturn is now more widespread geographically and we aren’t seeing any indicators pointing to the market bottoming out just yet.

Despit this, the long-running reduction in investment lending has understandably impacted Sydney and Melbourne’s housing markets more than others, considering investment activity was heavily concentrated in these cities. According to CoreLogic, the reduction in owner occupier credit explains a lot about the broader softening in housing market conditions more recently.

Investors as a proportion of new lending within each state _ Source: CoreLogic

Stricter lending standards are a logical outcome following the royal commission and we are likely in the early phases of a ‘new normal’ for mortgage lending where borrowers will face closer scrutiny around their expenses and ability to service a loan and conversion rates on loan application are likely to remain lower than they have over previous years.

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