KordaMentha Real Estate's Property exposures update provides a snapshot of APRA's latest property exposure data on commercial and residential sectors.
The Australian Prudential Regulation Authority ('APRA') recently released its latest quarterly property exposure data for domestic and foreign Authorised Deposit-taking Institutions ('ADI's').
The Property exposures update - December quarter 2018 provides a snapshot of APRA's quarterly property exposures data on commercial and residential sectors.
Investment lending growth is slowing although remains positive, whilst exposure to Land and 'Other Residential' (apartments and high-rise accommodation) continues to contract rapidly.
Exposure to investment loans grew by only 0.2% in the December 2018 quarter and 1.1% for the year, compared with 3.8% growth in the year prior. Land Development/Subdivisions exposure fell 11.1% across the year. Other Residential exposure recorded a rapid 5.5% decrease across the December 2018 quarter and a 1.2% decrease across the year, which marks the largest year-on-year drop since December 2013.
Interest only loan values down 59.8%
The value of approved new interest-only loans in December 2018 was 8.9% lower than in December 2017 and 59.8% lower than in December 2016. New interest- only home loan approvals remain near the lowest level since reporting commenced in March 2008. The December 2018 quarter saw a further decrease to 13,910 (down from 14,446 in September 2018). Interest-only loans as a proportion of total loans represented 15.8% in December 2018, which is generally consistent with the past five quarters since the peak in June 2017 (30.5%).
Foreign bank branches up 393%
Commercial property exposure to foreign bank branches is now 393% higher than in December 2012. Foreign bank branches now represent 6% of total exposures at December 2018, up from the post-GFC low of only 3.1% in December 2012, however, still below the pre-GFC high of 7.5% in December 2008.
Development exposure down 11.1%
An 11.1% decline in exposures to Land Development/Subdivisions for the 12 months to December 2018 indicates financiers' general aversion to the development market and coincides with broader market concerns about over supply risks in the medium to high density Residential sector. Exposure has continued to fall and has declined 22.8% from the most recent peak in March 2017.
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