Australian housing finance data came out today, and the growth in lending was slower than expected.

The number of owner-occupier home loans issued rose by 2.9% to 55,677, missing expectations for an increase of 5.0%. The July increase of 0.3% was also revised lower to -0.3%.

Loans for construction rose by 2.4% to 5,784 while those to purchase new dwellings increased 2.7% to 2,874.

Fitting with recent measures introduced by APRA to curb lending for housing investment, the value of home loans to investors slipped by 0.4% to $13.564 billion, largely offsetting a 0.5% gain in July. As the chart from the ABS reveals below, finance to housing investors has plateaued in recent months, both in seasonally-adjusted and trend terms.

Overall the value of home loans issued rose by 3.5% to $34.359 billion on the back of a substantial increase in the value of owner-occupier financing. Lending to this segment jumped by 6.1% to $20.795 billion, the highest level on record. Excluding refinancing, the value of loans to owner-occupiers hit $14.421 billion, also a record high.

And yet.

While there are clear signs that lending to housing investors has been stymied by recent measures implemented by APRA, as the chart above shows, lending to both owner-occupiers and investors in dollar terms has grown sharply when viewed in rolling annual terms. Over the past year, the value of loans extended hit $379.4 billion, the highest level on record and some 14.5% higher than that seen in the 12 months to August 2014.

And while in dollar terms lending to investors has slowed, it has been largely replaced by lending to owner-occupiers. Compared to August 2014 the value of lending to owner-occupiers rose by 26.5% to $20.8 billion, an increase of $4.4 billion. That’s some hefty growth, and does raise the question whether heat in the housing market is diminishing at present.

“The August lending data suggest that there is still a good deal of heat in the housing sector, but that the owner occupiers are now driving the market,” wrote Chris Caton, chief economist at BT Financial Group following the data release.

“The issue is that some of this change in behaviour is more apparent than real, being driven by recent regulatory changes, which have provided banks with a considerable incentive to classify loans as being to owner-occupiers rather than to investors.”

If that is the case the notion that the slowdown in investor lending is diminishing risks attached to the housing market is muddied to say the least. Average home loan sizes are continuing to increase, rising 15.9% to $375,800 in the 12-months to August, a far steeper rate than inflation or wages growth seen over the same time period.

Leverage is clearly increasing, and with increased leverage comes increased risk.

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