Login
iscover
The peak real estate industry body has slammed moves by Australia’s two key finance regulators to scrutinise mortgage lending.
The Australian Prudential Regulation Authority (APRA) has announced it will closely monitor "higher-risk mortgage lending", such as high-LVR loans, interest-only loans to owner-occupiers and loans with very long terms.
Meanwhile, the Australian Securities and Investments Commission (ASIC) has said it will investigate interest-only loans due to concerns about “higher-risk lending”, following strong house price growth in Sydney and Melbourne.
The Real Estate Institute of Australia (REIA) said the regulators’ actions are a threat to first home buyers, whose market share dropped to 12 per cent in the September quarter.
REIA CEO Amanda Lynch said tighter controls on housing loans are “totally unnecessary” and a “blunt instrument” that strikes the entire market rather than one or two hotspots.
“The trend for this latest quarter… is a cooling-off of the market nationally – even Sydney is coming off a high this quarter,” Ms Lynch said.
“You only have to look at the minutes of the Reserve Bank board meetings to know that concerns about a rise in property prices relate primarily to Sydney and, to a lesser extent, Melbourne.”
Ms Lynch said the regulators’ moves are the first step towards ‘macroprudential tools’ or new lending rules, which the REIA opposes.
“We know from the New Zealand experience that moves such as these disproportionally affect first home buyers, and APRA’s decision comes at a time when first home buyer levels in Australia have hit a record low,” she said.
“It was only last month that the Reserve Bank of New Zealand announced that it would be winding back its macroprudential measures after it became clear that it was shutting first home buyers out of the market.
“We need to learn from these overseas experiences and not jump to knee-jerk reactions.”
- <p>I find this comment a bit amazing given that loans to first home buyers have been stagnating over the last 3 to 4 years while loans to investors have skyrocketed, indicating that the main push to price increases in the Sydney and Melbourne markets is being driven by investors to the detriment of first homebuyers. The last big bust in real estate prices occurred with overheating caused by investors and that lead to a huge downward adjustment in prices that lasted years. To me the action proposed is reasonable in the present circumstances as we do not want to see a repeat of the boom bust conditions again. The reason why first home buyer loans dropped 12 per cent in the September quarter is because they cannot afford the inflated prices we are seeing at the moment. Interest only loans, because people can't afford principal and interest loans are the first to fail when interest rates rise. Unfortunately when the bust comes, the mortgagee in possession sales are generally first home buyers with interest only loans.</p>0
You are not authorised to post comments.
Comments will undergo moderation before they get published.