Authorities have been urged to invest in education and regulation if they want to slow the Sydney boom.
A property investment lobby group has expressed concerns about the way in which APRA, the prudential banking regulator, is trying to cool investor activity in Sydney and in Melbourne.
Property Investment Professionals of Australia chair Ben Kingsley said that although the authorities are right to be concerned about speculative investor activity in Australia’s two biggest cities, they run the risk of punishing people who want to invest in other capitals.
Mr Kingsley said the best approach would be for APRA, the federal government, ASIC and the Reserve Bank to run a campaign to educate consumers about property investment.
“Only with a clear understanding of the market can investors make more informed decisions,” he said.
“Not every property makes a sound investment and in this upswing cycle there will be many who will lose money.”
Mr Kingsley also called for the introduction of qualifications for those who provide property investment advice “to avoid a post-boom mess”.
"I can guarantee you, once losses are experienced in the next few years, those consumers will want to blame someone and will look to blame the government for not protecting them – even if they made their investment decision themselves or bought via a property spruiker.”
Meanwhile, AMP Capital chief economist Shane Oliver said APRA’s campaign to persuade banks to tighten their investor lending standards is likely to succeed, because the banks will be reluctant to give the regulator a reason to impose tougher rules.
Mr Oliver said the result would probably be a reduction in price growth in Sydney and Melbourne over the next year.
“However, a downturn in property prices will likely have to await the start of interest rate hikes, and that’s unlikely until 2017.”