APRA has more tools to tackle house prices

APRA has more tools to tackle house prices

Continuing the theme this week this is another article looking at the changes that are occuring in the investor lending space. This article looks at what other measures that the Regulator APRA can bring to play to address the concern they have with the growth of investor lending in Australia.

APRA has recently outlined it has further measures it could implement, including increasing capital requirements, applying limits to certain types of lending, as well as additional oversight.

“Higher capital requirements were a recommendation from last year’s financial system review and any official announcement on them is still forthcoming,” Mr Bloxham said.

“The flagging of the possibility that prudential settings might be further escalated likely reflects the fact that there are trends in parts of the financial system that could be becoming more worrisome.”

Given the talk from both APRA and ASIC, and the action which has already been taken by a number of banks, there is going to be continued differentation in pricing or maximum LVR’s between onwer occupier and investment loans.

Given the growth in property prices which have been seen in Sydney and Melbourne, it is easy to see where APRA and ASIC’s concerns are.

Sydney house prices have shot up 14.9 per cent, year-on-year and 40 per cent over the last three years, while Melbourne have risen 8.5 per cent in the last year and 22 per cent over the last three, according to HSBC and RP Data.

We will have to wait and see if the current measures put in place by APRA and the mainstream banks will have the desired effect moderating growth of property prices to more sustainable levels or if APRA will have to utilise some of the other tools in its arsenal to get the desired results.