Powered by MOMENTUM MEDIA
subscribe to our newsletter

Regulation is ‘squeezing’ property investors out

Tightened lending requirements have pushed investors out of the property market, which has, in turn, triggered the price growth slowdown, according to a new analysis.

According to ANZ’s latest report, Australian Housing Update – Gliding to a soft landing, the stricter lending rules put in place by the Australian Prudential Regulation Authority (APRA) have “driven investors out of the housing market”.

Last year, APRA called on lenders to limit interest-only loans to within 30 per cent of their loan books, building on December 2014 laws requiring lenders keep investor growth to within a 10 per cent benchmark.

While APRA has flagged that it will remove the 10 per cent benchmark “sooner rather than later”, the 30 per cent interest-only limit is unlikely to be removed as soon.

In its report, however, ANZ was firm that APRA’s changes have had the effect of “squeezing” investors from the market.

Advertisement
Advertisement

“To a large extent, they are being replaced by first home buyers, who are enjoying stamp duty discounts in New South Wales and Victoria,” the report’s authors, Daniel Gradwell and Joanne Masters, said.

At the same time, they warned that the subdued investor activity has “translated into a slowdown in price growth”.

This slowdown, nonetheless, was in line with ANZ’s expectations, with the authors predicting that most of the slowdown has already occurred.

“APRA’s regulatory tightening, first on investor borrowing then on interest-only loans, was always expected to take some demand out of the market and slow price growth,” they said.

“We retain our view that prices will not materially decline. Over the near term, auction results in Sydney and Melbourne suggest that the majority of the price growth adjustment is behind us.”

PROMOTED CONTENT


However, while the economists consider the housing sector to be free of any “clear signs of stress”, they are not as sanguine as the Reserve Bank of Australia, given continued credit growth outstripping income growth.

“It’s not all plain sailing. Financial stability remains a medium-term concern, although there are yet to be any notable signs of distress and the recent slowdown in house price growth is encouraging. Nonetheless, we remain cautious given that credit growth continues to outstrip income growth,” the authors said.

[Related: Capital city property prices continue to fall]

Regulation is ‘squeezing’ property investors out
mortgagebusiness

Are you a new-to-industry broker in the process of growing your business? Then there’s some great news: The Adviser’s New Broker Academy is back in 2021 and will provide you with essential insights into cutting-edge tools, strategies and processes to fast-track to success. Don’t miss your chance to attend. To secure your FREE place, visit newbroker.com.au now!

Latest News

The financial services regulator has released examples of how the incoming rules for add-on insurance will work for CCI, among other credit ...

The major bank has said that it is committed to the sale of its Pacific businesses despite a competition regulator knocking back their propo...

A prime residential lender has announced the pricing of one of its largest prime residential mortgage-backed securities to date. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.