According to RiskWise Property Research, there is a possibility that regulators could introduce credit restrictions later this year in an attempt to slow down Australia’s booming housing market.
Riskwise’s CEO Doron Peleg said on Tuesday that targeted measures outside can be an effective method of reshaping the trajectory of the housing market, pointing to the Australian Prudential Regulation Authority’s (APRA) market intervention in 2017 aimed at investor and interest-only lending.
“This time around the dynamics are different,” Mr Peleg said. “In fact, the share of investor loans has been very low, and the stock of interest-only loans as a share of total mortgage debt is now at record lows and falling.”
“Therefore, were any regulatory restrictions to be required later in the year, the measures might take a different policy approach”.
Mr Peleg’s remarks echoed last week’s veiled warning from Reserve Bank Governor Dr Philip Lowe, who expressed concern for the potential of loosening standards increasing medium-term risks and adding to the upward pressure on housing prices.
“The Council of Financial Regulators has indicated that it would consider possible responses should lending standards deteriorate and financial risks increase,” Dr Lowe told a business summit in Sydney, adding that “we are not at this point, but we are watching carefully”.
Mr Peleg pointed to loan to value restrictions having been put in place in New Zealand this year, alongside further tightening measures for investors, saying these measures were expected to help slow down the fast pace of growth in housing prices as 2021 progresses.
But he added that Australia’s housing market “is only just heating up now, and capital city prices are still tracking at around 2017 levels, so there will be no urgency to bring in credit restrictions”.
Peter Wargent, co-founder of BuyersBuyers.com.au, said there were signs emerging of sellers becoming more willing to bring properties to market, and that this potential new supply could help address stock shortages.
“We’ve seen several property market frenzies over the years, and they do tend to die of old age eventually, as more sellers look to capitalise on their gains and as buyers become more circumspect as the cycle progresses” Mr Wargent said.
“Only a few short months ago some high-profile commentators were making bold – if largely substantiated – claims about a housing market calamity, so it’s a bit of a stretch to say that the supply of credit should be throttled back already.”
Mr Wargent pointed out many borrowers were still on deferred mortgages, “and tighter lending restrictions will do nothing good for them”.
According to Mr Peleg, macroprudential measures tended to have a greater impact on off-the plan apartment purchases and high-rise units.
“Buyers should try to focus on properties with a high level of owner-occupier appeal, as these will tend to be less affected by regulatory intervention,” he said.
