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Invest

‘Punitive' restrictions push investor lending to two-year low

By Reporter
  • June 13 2018
  • Share

Invest

‘Punitive' restrictions push investor lending to two-year low

By Reporter
June 13 2018

The value of investor housing loans has sunk to its lowest level in two years, the Housing Industry Association has said, arguing for the removal of “punitive” restrictions.

Restrictions, investor lending

‘Punitive' restrictions push investor lending to two-year low

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By Reporter
  • June 13 2018
  • Share

The value of investor housing loans has sunk to its lowest level in two years, the Housing Industry Association has said, arguing for the removal of “punitive” restrictions.

Restrictions, investor lending

Since mid-2015, the value of loans to investors has fallen 24.7 per cent, HIA principal economist Tim Reardon said, drawing on the latest ABS housing finance data.

“The fall off in investor participation has been caused by a number of factors including tighter financial regulations and the targeting of certain loan products favoured by investors,” Mr Reardon said.

“The federal government targeted investors with two successive interventions in the market through APRA and state governments introduced punitive rates of stamp duty on foreign investors.

“Less investor involvement in the market is one of the reasons why we have seen a slowing in new home building and why we are expecting this slowdown to continue over in the next couple of years.”

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The Australian Prudential Regulation Authority (APRA) instructed all lenders to limit the flow on new interest-only lending to 30 per cent of total new residential mortgages in March 2017.

That mandate supplemented a requirement that lenders keep investor lending growth to below 10 per cent. This restriction, brought in in December 2014, will be removed as of 1 July 2018 provided APRA is satisfied with the lenders’ policies and practices.

Noting that investor loan value has fallen from $12.6 billion in April 2017 to $10.7 billion in April 2018, Mr Reardon argued for continued removal of lending speed-limits.

“In order to address the affordability challenge, Australia should be facilitating rather than impeding the delivery of new homes for all potential buyers – owner occupiers and investors,” he said.

“Investor participation in Australia’s housing market is crucial in ensuring that enough rental accommodation is available. Any changes that impact on housing investment must consider the long-term impact on all parts of the market.”

Comparison provider, RateCity suggested the slow-down could also be attributed to the unfolding Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Describing APRA’s lending curbs as “clever”, a RateCity spokesperson said the royal commission has prompted banks to tighten up their lending approval processes.

“Findings from the royal commission have also had a major impact on loan application processes, with increased scrutiny on  paperwork at every step in the process,” the spokesperson said.

‘Punitive' restrictions push investor lending to two-year low
Restrictions, investor lending
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