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RBA may further curb foreign lending towards overseas investors

There is a possibility that the RBA could take further macro-prudential measures in stifling lending towards foreign investors in order to give more locals the much-needed break into its own housing market, particularly on the east coast of Australia.

Referencing the 2014 macroprudential measures which included cap on investor lending growth and more prescriptive loan serviceability guidelines, Assistant RBA Governer Michele Bullock said in her speech at Bloomberg in Sydney on Tuesday, “There is no doubt that those actions did address some of the risks.”

But she also warned that those measures could be running out of steam and that the regulators would look at doing more if need be.

“While the resilience of both borrowers and lenders has no doubt improved, the initial effects on credit and some other indicators we use to assess risk may fade over time.

“We are continuing to monitor their ongoing effects and are prepared to do more if needed.”

Bullock, in her maiden speech, said that while individual decisions by banks may appear reasonable, regulators’ concern is that together they could lower overall lending standards.

Meanwhile, the Australian Financial Review reports that the New South Wales (NSW) government is under pressure to lift stamp taxes for foreign home buyers after new figures showed foreigners account for 11 percent of overall home sales.

Figures released under Freedom of Information laws from the NSW Office of State Revenue showed that foreign nationals accounted for 28,141 residential homes purchased in NSW from July to September last year.

It came as no surprise that the Chinese have purchased over 32 percent of these properties, followed by British and New Zealanders at 11 percent each and Indians at 10 percent.

The figures were recorded after the June budget when the NSW government imposed a 4 percent surcharge on stamp duty for property purchases by foreigners and a 0.75 percent land tax surcharge.

In a related development, the NSW premier Gladys Berejiklian said on Tuesday that she was not clear if taxing foreign buyers could help cut prices for locals.

Since being elected as NSW premier earlier in the year, Berejiklian has vowed to tackle housing affordability by making it as one of her top priorities and has in recent weeks named the former RBA governor Glenn Stevens to advise her on solutions.

Meanwhile, the current NSW treasurer Dominic Perrottet has vowed to look into the matter as well.

“The great Australian dream is to own your own home – while foreign investment brings an important flow of capital into NSW, my priority is to ensure Australians have that opportunity first.”

“We moved on this issue last year when we introduced the foreign investor surcharges – something Labor opposed at the time.

“While the evidence suggests the surcharge is unlikely to significantly affect house prices, it does deliver value back to NSW taxpayers when foreign investors purchase property here.

“We said last year that we would continue monitoring the surcharges, and would keep our options open going forward. That remains the case.

It has been previous reported that many foreign citizens who purchased homes in Australia are in actual fact permanent residents that were only required to pay the stamp duty surcharge or in some cases obtain the approval from the Foreign Investment Review Board, adding that the proportion of sales to actual foreign investors was only standing at 1.5 percent.



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June Ramli

June Ramli was a in-house journalist for Elite Agent Magazine.