Australian Mortgage Market: Forecasts and Future Opportunities 2016

  • ID: 3978263
  • Report
  • Region: Australia
  • 40 Pages
  • GlobalData
1 of 5
First-Time Buyers Remain the Weakest Part of the Market, Accounting for Just 14.8% of Gross Advances in 2015

We estimate that growth in the value of balances outstanding for both owner-occupier and investment residential mortgages will be 6.1% in 2016, a slight decrease on the strong performance in 2015. The market will continue to decelerate over the forecast period as owner-occupier growth tapers off and investment property lending fails to make up for the slack.

Key Findings:

  • First-time buyers remain the weakest part of the market, accounting for just 14.8% of gross advances in 2015
  • Growth in investment property lending flatlined in light of Australian Prudential Regulation Authority restrictions, with owner-occupier lending surging at the same time
  • Lending to foreign buyers is up considerably, but the majors have pulled back from foreign investors in light of fraud and the potential oversupply of apartments in key investment markets
  • Refinancing has continued to gain as a share of gross advances, increasing the churn in the market and contributing to net interest margin compression

“Australian Mortgage Market: Forecasts and Future Opportunities 2016” analyzes the Australian residential mortgage market, with coverage of both the investment property and owner-occupier market, including first-time buyers.

Specifically the report:

  • Analyzes relative performance of the major sectors of the Australian mortgage market, including both mutual and bank as well as non-ADI lenders
  • Reviews the drivers behind recent market performance
  • Forecasts balances outstanding for both mutual and bank lenders, looking at the evolving growth of the investment property, owner-occupier, and first home buyer segments
  • Forecasts future drivers of growth and product features

Reasons To Buy:

  • Which factors will impact the supply of mortgage lending?
  • Which factors will affect consumer demand for mortgages?
  • Which sectors offer the best prospects and opportunities for expansion over the next few years?
  • What will be the market share of key mortgage sectors over the next few years?
Note: Product cover images may vary from those shown
2 of 5

1. Executive Summary

  • The residential mortgage market in Australia is expanding at a slowing pace, weighed down by high prices in key city markets
  • Key findings
  • Critical success factors

2. The Mortgage Market in Australia

  • The Australian mortgage market is moderating from the peak of the boom
  • Australia's residential mortgage market was worth A$1,580bn at the end of 2015
  • Mortgage growth has become lopsided, and is derived almost entirely from owner-occupiers
  • Higher rates and tighter criteria have taken the growth out of the once booming investor segment
  • First-time home buyers are still being squeezed from the market
  • Mortgage underwriting remains dominated by bank ADIs
  • Market profitability is under strain as net interest margins remain at all-time lows
  • Even the major banks are struggling with margin compression
  • Market activity continues to heavily feature refinancing, with talk of a construction glut not figuring prominently in lending data
  • The strong uptick in gross advances continues to moderate from the peak of the boom starting in 2013
  • With rate increases unlikely in the short term, the fixed-rate rally has fizzled

3. The Future Decoded

  • Australian mortgage lenders can expect continuing market expansion, albeit at a slower rate
  • Most growth will come from bank lenders as the mainstay of the market
  • Despite strength among individual players, conversions will see credit unions and building societies end up with lower balances
  • Mortgage lending over the forecast period will be affected by various factors
  • Factors that are relevant but discounted over the forecast period

4. Market Trends

  • The owner-occupier market will be driven by consumer confidence
  • Improving but erratic consumer confidence will boost growth at the margins of the owner-occupier market
  • Most of Australia is still seeing property price increases, barring the mining towns
  • Investor activity will be moderated by the glut of inner-city apartment completions
  • Demand from foreign investors has become a contentious element of the market
  • While dampened by heightened demand for fixed-rate mortgages, loans with offset facilities will remain a mainstay of the market
  • Negative gearing and investment loans will continue to support demand for interest-only mortgages but offer little prospect for growth
  • While forecast to grow in value, the market share of reverse mortgages will remain more or less unchanged
  • Non-standard loans will remain niche as banks remain wary of risk
  • Distribution trends still favor further growth in the broker channel
  • Australian mortgage distribution dynamics have changed considerably since the financial crisis
  • Broker-only deals have proliferated, and consumers are increasingly using the channel for refinancing
  • Broker commissions are under review, which may dent growth in volume

List of Tables
Table 1: First-time buyer activity in Australia, 2010-16
Table 2: Gross advances and approved foreign investment for residential property (A$m), 2010-11 to 2014-15
Table 3: Foreign buyer property taxes and surcharges, 2016
Table 4: Non-conforming residential mortgage loans on ADI balance sheets, 2011-16 (A$m)

List of Figures
Figure 1: APRA restrictions on investment property mortgages have reversed the dynamics of the market
Figure 2: Residential mortgage balances outstanding are mostly held by traditional banks
Figure 3: The margin from mortgage lending is at an all-time low
Figure 4: Non-performing loans remain subdued, but have increased modestly
Figure 5: Gross advances are still growing at double digit rates
Figure 6: Refinancing continues to trend up, growing balances outstanding by less than total gross advances would suggest
Figure 7: Recent RBA cuts to the cash rate have killed off the fixed-rate loan rally
Figure 8: Auswide has responded to uncertainty in the standard variable-rate market by offering tracker mortgages
Figure 9: A lack of rate increases and a steady economy will fuel continued expansion
Figure 10: The owner-occupier segment will power the market over the course of the forecast
Figure 11: Conversions will continue to drain the mutual sector
Figure 12: Factors affecting the growth of mortgage balances outstanding in Australia
Figure 13: Consumer confidence is tracking upwards from its 2015 low, supporting owner-occupiers and first home buyers alike
Figure 14: Annual price changes in capital city property markets, tracked quarterly
Figure 15: Offset mortgages will account for almost half of all loans in the market
Figure 16: Interest-only loans will peak in 2018, with balances continuing to grow
Figure 17: Reverse mortgage market share will record minimal growth
Figure 18: Brokers are originating close to half of new loans

Note: Product cover images may vary from those shown
3 of 5


4 of 5
  • APRA
  • RBA
Note: Product cover images may vary from those shown
5 of 5
Note: Product cover images may vary from those shown