SMSFs, foreign buyers don’t drive property market

AMP Capital chief economist Shane Oliver has argued that strong house price growth has not been driven by SMSF or foreign investors.

Rather, Mr Oliver says a combination of low interest rates and undersupply has led to two decades of house price growth, most recently in Sydney and Melbourne.

“A sustained period of low interest rates has enabled Australians to borrow more for a given level of income,” Mr Oliver said.

“Consequently, this higher borrowing has allowed Australians to pay more for homes,” he said.

Meanwhile, restrictive land supply policies coupled with high stamp duty and infrastructure charges have subdued the supply of real estate in Australia, he added.

“Reflecting this, residential vacancy rates remain relatively low,” he said.

The RBA is in discussion with APRA on steps that could be taken to ensure sound lending practices are maintained with a focus on investors.

Mr Oliver said this could involve limits on loan-to-valuation ratios, or more likely, measures that would force banks to either put aside more capital for loans to property investors or impose tougher tests when granting loans.

“We expect to hear more on these measures in the months ahead,” he said.

However, HSBC chief economist Paul Bloxham has downplayed the threat of lending curbs, telling Mortgage Business that any new regulation will be incremental, rather than revolutionary.

“The RBA hasn’t said they are introducing macroprudential tools,” Mr Bloxham said.

“What the RBA has said is that they are, jointly with the prudential regulator, discussing the possibility of taking additional measures to try and slow activity in some parts of the housing market,” he said.

“I suspect that these are going to be incremental rather than revolutionary changes. I suspect it will be an addition to the current prudential framework rather than introducing a new macroprudential framework for setting prudential policy within the economy.”

Speaking at the Finsia annual conference last month, APRA chairman Wayne Byres said the newest thing about the current conversation regarding bank regulation is the word ‘macroprudential’.

“Actually a lot of what we are talking about is just normal regulation and regulation responding to circumstances,” Mr Byres said.

Comparing the current market conditions to those during 2003 and 2004, where house prices experienced rapid growth, Mr Byres said APRA had “the same playbook” and has taken the same course of action.

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