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APRA tipped to tighten investor lending even further

APRA tipped to tighten investor lending even further

One of Australia’s most respected economists says there is a "good chance" the prudential regulator will crack down on a recent lift in property investor activity by announcing stricter lending conditions for banks.

Last week’s housing finance figures for the month of June showed a 3.2 per cent increase in investor loan commitments following a 3.9 per cent surge in May.

In a note this week AMP Capital chief economist Shane Oliver said investor lending is having a bit of a bounce after growth in the total bank book of lending to investors fell way below the APRA 10 per cent limit.

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“But it’s doubtful that investor lending will be allowed to pick up too far as there is a good chance that APRA will lower the 10 per cent limit to around 7-8 per cent,” he said.

APRA’s macroprudential measures so far include keeping lending to investors below 10 per cent annual growth and raising capital adequacy requirements for the major banks and Macquarie.

The regulatory action was taken following a strong surge in property prices in Sydney, where house prices have risen by more than 50 per cent in three years, and to a lesser extent in Melbourne.

ANZ economists noted this week that increased regulation initially saw demand for housing ease toward the end of 2015, but the market has since been more robust than anticipated.

“The May and August rate cuts, and the possibility of more to come, likely underpin this resilience,” they said.

“However, different data sources have shown a divergence in house prices in recent months.

The RBA has identified this, and appears to be placing greater weight on the measures showing an ongoing slowdown in price growth. As such, the Bank is more comfortable that rate cuts will not reignite growth in house prices.”

ANZ believes that tighter lending standards are still likely to cool the housing market, predicting average price growth to fall below 2 per cent next year.

However, if APRA calls for even greater growth caps on banks’ investor loan books the impact on the housing sector could be more pronounced.

[Related: Why are lenders continuing to tighten up policies?]

APRA tipped to tighten investor lending even further
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