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APRA curbs stunting growth in apartment market, says lender

Macro-prudential measures imposed by the regulator in 2014 are beginning to take the heat out of the apartment market, with conditions expected to cool further throughout 2018, according to a commercial property lender.

The CEO of the Thinktank Group (Thinktank) has said that the Australian Prudential Regulation Authority’s (APRA) introduction of macro-prudential curbs on investor lending in 2014 are beginning to slow the apartment market.

Jonathan Street pointed to the group’s Australian Commercial Real Estate Market Focus report, which predicted that 2018 will see a 10.7 per cent fall in the number of completed units.

“It’s the first decline in the market for the past seven years. In 2017, 65,700 apartments were finished across Australia, and that number is expected to fall to 58,700 in 2018,” Mr Street said.

The CEO noted that the behaviour of developers has begun to change in response to reduced access to finance for investors.

“There is also evidence of developers who have bought income-producing assets, especially in suburban markets with tight office and industrial capacity, and are taking advantage of this income stream until their development project has been approved,” Mr Street continued.

Moreover, Mr Street claimed that investor access to credit may tighten further in the aftermath of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

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“It seems likely that a by-product of this royal commission will be some level of tightening of credit across the economy, and that must flow through to the apartment market; a more risk-averse environment by lenders is already an evidence and is likely to be the new norm,” the CEO said.

The Thinktank research also revealed that in the past three years, 169,900 apartments were added to the stock of Australia’s five largest capital cities, with Greater Sydney (74,200) and Greater Melbourne (56,500) spurring the growth.

“It will be interesting to watch if the current growth of Melbourne can be sustained versus Sydney’s slightly slowing but in a larger market and with larger apartments,” Mr Street concluded.

[Related: Top end of town takes a tumble]

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