APRA under pressure to curb lending as Sydney booms

Booming property prices in Sydney show no signs of cooling, leading CoreLogic to believe that the banking regulator won’t be able to get out of 2017 without taking some serious action.

The latest CoreLogic figures showed that the value of Sydney housing increased by a 2.6 per cent in February alone. The city’s annual rate of growth is now 18.4 per cent, the highest since the 12 months ending December 2002.

The prudential regulator this week said it sees ‘no room for complacency’ but is yet to announce further lending curbs.

Appearing before the Senate economics legislation committee in Canberra yesterday, APRA chairman Wayne Byres said there is "no doubt" that monitoring conditions in the Australian housing market remains high on its priority list.

“We have lifted our supervisory intensity in a number of ways, including reinforcing stronger lending standards and seeking in particular to moderate the rapid growth in lending to investors,” Mr Byres said.

“These efforts have had the desired impact: we can be more confident in the conservatism of mortgage lending decisions today relative to a few years ago, and lending to investors was running at double digit rates of growth but has since come back into single figures,” he said.

“However, strong competitive pressures are producing higher rates of lending growth again.”

Mr Byres noted that this is occurring at a time when household debt levels are already high and household income growth is subdued.

“The cost of housing finance is also more likely to rise than fall. We therefore see no room for complacency, and mortgage lending will inevitably remain a very important issue for us for the foreseeable future,” he said.

Last week APRA announced fresh guidance on mortgage lending, updating its Prudential Practice Guide APG 223. In its letter to Australian banks APRA outlined a number of key areas including serviceability assessments, buffers and the assessment and verification of income, living expenses and other debt commitments, where changes have been made to APG 223.

“Those were minor changes and most of those would probably have already been in effect from the banks before this was made public,” CoreLogic head of research Cameron Kusher told Mortgage Business.

“But it seems there is a real reluctance to step back into the market. When you look at these figures and you see that the Sydney housing market is the strongest it has been since 2002, they are not really leaving themselves much choice but to come in and do something much more overt to try and slow down the housing market,” Mr Kusher said.

“If we look at what they have done in Canada and what they have done in New Zealand, they are probably looking at some of those policies. One in British Columbia in particular, the tax on vacant properties, has been very effective,” he said. “Maybe they are looking at something along those lines.

“I don’t think they are going to get out of 2017 without doing something to slow down the housing market.”

[Related: Analysis: The investor lending dilemma]

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