RBA figures strengthen case for lending curbs

The RBA’s financial aggregates for September show that on a seasonally adjusted basis, credit for investor housing grew 9.4 per cent year-on-year in September, up from 9.1 per cent in August.

The figures come at a pivotal time for the Australian lending market, which is facing the possibility of lending curbs after the central bank flagged the rise in investor lending as a systemic risk.

Last week, Mortgage Choice chief executive Michael Russell slammed the RBA, saying curbing investor activity was “perplexing” and “fruitless”.

Speaking at the national mortgage broker's annual general meeting on Wednesday, Mr Russell criticised the central bank for flagging potential regulatory intervention to curb investor activity in the housing market.

"I'm a bit perplexed as to why we would be singling these people out," Mr Russell said.

"It just seems quite fruitless to be curtailing demand,” he said.

In its Financial Stability Review, the RBA said that the main risk, as a result of strong investor activity, is that the extra demand may intensify the housing price cycle and increase the potential for prices to fall later.

Speaking at the Australian Housing and Urban Research Institute (AHURI) Panel Roundtable in Sydney last week, RBA head of financial stability Dr Luci Ellis pointed to recent downturns in the Australian property market as evidence that rising house prices cannot continue forever.

Dr Ellis highlighted the years 2004, 2009 and 2011, where Australian house prices fell relative to consumer prices.

Nationally, house prices fell in absolute terms in 2009 and for an extended period in 2011, while in Sydney they fell on all three occasions on a year-end basis.

“This is not a country where we haven’t experienced house price falls,” Dr Ellis said.

“We have experienced house price falls; there is risk in the system that people have experienced,” she said. “It is simply incorrect to treat the Australian history as if there has never been any kind of downturn.”