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Regulatory changes could backfire: Cigna

Moves by the regulators and banks to curb investor lending growth in Sydney and Melbourne will needlessly harm investors in other parts of Australia, according to a wealth group.

Cigna Wealth managing director Kent Leicester said changes that have been introduced to tighten up investor lending, such as raises to interest rates and LVRs, are penalising investors, and could cool the investor market nationwide.

“Our economy is in a two-speed cycle with the big property price increases focused on Sydney and Melbourne,” he said.

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“Investors in places such as Brisbane and Perth are being unfairly targeted over the property boom in Sydney and Melbourne.

“Regulators and lenders need to be careful with how they deal with this, as they risk hindering the market in others parts of the country where real estate is not booming.”

Mr Leicester’s view on the investor lending crackdown is shared by Michael Davoren, managing director for RE/MAX Australia and New Zealand, who said APRA's 10 per cent investor lending limit could have unpredictable consequences.

“There is a very real danger in applying a national remedy to a problem that is not national,” he said.

“There is no boom evident in most places outside Sydney and Melbourne – and even within those markets, it’s not in all suburbs.

“There should be more engagement with financial and real estate industries before decisions are reached.”

Mr Davoren pointed to the use of macroprudential measures in New Zealand, where lending restrictions were introduced for people buying houses in Auckland.

“It didn't really impact where they wanted it to but it did cruel the first home buyer market,” he said. “Don’t strangle a market when and where you don’t need to.”

Regulatory changes could backfire: Cigna
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