The noises over the introduction of tighter lending restrictions on Australian property investors continues to grow louder.
According to reports in the Australian Financial Review today, a special regulatory working group — containing officials from ASIC, APRA and the RBA — was set up last week to crack down on bank lending to riskier investor and low-deposit borrowers.
The AFR says the decision was a result of direct intervention of Australian federal treasurer Scott Morrison, with the tougher restrictions set to be introduced “imminently”.
“Among the measures being considered are as much as halving the annual speed limit on investor lending growth from the current 10% level imposed in 2015,” says the AFR.
“Banks will also be required to test the ability of borrowers to repay their loans at interest rates 3 percentage points higher than today, up from the current requirement of 2 percentage points.”
Some are also speculating that capital risk weightings for investors with multiple properties in their portfolio may be raised as much as fourfold.
The move to cool investor activity, predominantly in Sydney and Melbourne, follows signs of a noticeable acceleration in loan growth to housing investors over the past six months.
According to data released by the ABS earlier this month, lending for housing investment soared by 4.2% to $13.784 billion in January, the largest monthly total since May 2015.
The figure was 27.5% higher than the levels of a year earlier, and was the strongest growth since January 2015, the month after APRA introduced its 10% annual cap on investor borrowing.
Separate data released by the RBA said that housing investor credit increased by 6.6% in the year to January, below APRA’s annual 10% cap but a significant acceleration on the levels reported in mid-2016.
The rebound in new investor loans, and increasing growth in outstanding investor credit, has corresponded with some enormous price gains in Sydney and Melbourne, favoured destinations for property investors in the past.
Over the past month, prices in Melbourne surged by 3.7%, and by 2.2% in Sydney, according to data released by CoreLogic.
Reflective of that trend, prices in Sydney increased by 18.9%. Price growth in Melbourne wasn’t far behind at 14.7%.
Those type of gains, coming on top of continued strength in Sydney and Melbourne house prices over the past eight years, are clearly unsustainable, and are understandably raising concerns over financial stability risks from the RBA and APRA, among others, given weak household income growth and soft labour market conditions at present.
Where there’s smoke there’s fire. And it appears those concerns are now about to result in action.
You can read more at the Australian Financial Review here.