More action on investor home loans tipped

Melissa Jenkins
(Australian Associated Press)

 

Housing investors may soon find it tougher to get finance, as an investment bank tips imminent action from regulators in an attempt to quell growth in Sydney and Melbourne property prices.

The Australian Prudential Regulation Authority at the end of 2014 directed banks to take steps to keep annual growth of investor credit below 10 per cent.

There was a subsequent slowing of investor credit growth from mid-2015 for much of the following year but by January 2017 home loans to investors accounted for 40 per cent of new finance approvals.

RBC Capital Markets economists predict further steps from the regulator to keep a lid on investor loans, tipping a tightening of the 10 per cent limit ahead of a key financial stability report from the Reserve Bank of Australia due in coming weeks.

“We think that a drop in the 10 per cent cap is likely and will be most effective either via banks complying or having to hold greater capital if they do not comply which will need to be passed on to key borrowing rates,” the economists said.

“It is clear that other policy makers are also contemplating measures to add to the regulatory pressure such as restricting the percentage of sales to investors although we are less confident that these types of policies will be enacted or effective given political constraints.”

Last week, ANZ and the Commonwealth Bank raised their mortgage rates, following the lead of National Australia Bank and Westpac.

All four big banks have now moved out-of-cycle since the US Federal Reserve lifted its cash rate earlier in March.

Both the ANZ and CBA raised variable rates for investor and interest-only mortgages, while Commonwealth Bank also lifted its owner-occupier variable rate by 0.03 percentage points to 5.25 per cent per annum.

ANZ left its owner-occupier rate unchanged at 5.25 per cent.

Meanwhile, auction activity has remained strong, with CoreLogic data showing that the number of homes going under the hammer last week hit its second highest weekly level this year.

Some 3,147 homes were auctioned in the week ending March 26, compared with 2,916 the week earlier.

The average price of a house in Sydney was $950,000, 19.6 per cent higher than at the same time last year and up more than five per cent since the start of 2017.

Melbourne’s average house price also continues to rise, sitting at $710,000 – up 15.5 per cent on the same time last year.

CAPITAL CITY MEDIAN HOUSING PRICES

HOUSES

Sydney – $950,000

Melbourne – $710,000

Canberra – $665,000

Perth – $510,000

Brisbane – $505,000

Darwin – $493,000

Adelaide – $446,750

Hobart – $365,000

UNITS

Sydney – $740,000

Melbourne – $525,000

Perth – $418,500

Canberra $405,000

Brisbane – $392,000

Adelaide – $323,250

Hobart – $306,500

Darwin – $295,500

Source: Capital city private treaty sales, representing about 85 per cent of all dwelling sales across Australia. Data from CoreLogic Property Market Indicator Summary week ending Marchg 26, 2017.

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