Australia’s banking regulator APRA has outlined it’s likely response to the threat of a property bubble in Australia.
It is now expected to make attempts to cool rapid price rises in the property market through intervention.
CLSA banking analyst Brian Johnson spoke to Property Observer.
“At this stage, I think it’d be very much about trying to intervene to tame the investor market because the one thing they don’t want to do from a policy response is to actually squeeze out first-home buyers,” he said.
As for the chairman of APRA himself, Wayne Byres said the focus will be on making banks put aside more capital to support investment property loans, which will mean higher rates for borrowers.
“We use the regulatory capital framework to create incentives for prudent lending and to ensure that while institutions remain free to decide their lending parameters, those undertaking higher risk activities do so with commensurately higher capital requirements,” he said.
On top of this, there may also be tougher debt serviceability tests for investors and higher deposit requirements.
RBA chairman Glenn Stevens has also weighed in on such intervention.
“We’re keeping a close eye on the build up of credit to investors in the housing market, not to owner-occupiers per se and certainly not to first-home buyers,” he said.
“As we’ve said, we are in discussions with APRA about whether there is more that ought to be done to reinforce sound lending standards.”
Malcolm Gunning from the Real Estate Institute of NSW told Property Observer his thoughts on intervention.
“Possibly the warning should have went out 12 months ago, and the warning should – not so much a warning to investors – it should be to the banks saying, ‘If you’re going to lend to investors, you should be looking for 15 per cent deposit’,” he said.
Mr Johnson said changes to the tax system was the real way to make change to the property market, rather than Australia’s regualtors or banks.
“The only thing that works is really reforming tax incentives, and in Australia what creates a lot of this is the double whammy of the negative gearing tax deduction plus the concessional capital gains tax rate,” he said.