Invest
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market.
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market.
The RBA has declared that the measures implemented by the Australian Prudential Regulation Authority (APRA) between 2014 and 2018 succeeded in curbing the deterioration in lending standards amid a housing boom.
“The broad aim of macro-prudential policy is to manage systemic risk in the financial sector. Our results show that, despite some initial difficulties and unexpected effects, banks reacted by reducing growth in risky types of lending targeted by the regulator,” the central bank’s Nicholas Garvin, Alex Kearney and Corrine Rosé concluded in their paper, Macro-prudential limits on mortgage products: The Australia experience.
“As such, our results suggest that these macro-prudential policies achieved their stated aims and contributed to a reduction in risk in the financial system.”
The RBA’s thorough analysis comes hot on the heels of top bank predictions that APRA is readying to strike to stem investor lending which is starting to incline steeply.
Cause for such predictions has been the exponential house price growth, with recent data revealing that in the 2020–21 financial year alone, property prices across the country soared by 13.5 per cent, marking the highest growth rate since 2004.
Earlier this month, economists at ANZ said they expect the watchdog to act to cool the housing market as soon as this year.
Their forecasts now assume that price growth in Australia’s housing market will slow as “hard” macro-prudential policy is implemented before the end of 2021.
And if the RBA’s paper is anything to go by, APRA has the full support of the central bank.
The last time APRA implemented macro-prudential policies, it was targeting risks building in speculative components of the mortgage market, which, at the time, were seen to have the potential to amplify housing market dynamics and economic fluctuations.
The first policy, announced in late 2014, required banks to limit their annual growth in investor mortgages to no more than 10 per cent.
The second policy, announced in early 2017, required banks to limit their lending in interest-only mortgages to no more than 30 per cent of their total new housing lending.
According to the RBA, both policies quickly reduced aggregate growth in the types of lending that APRA was targeting, as the banks, within the space of 12 months, limited the growth of certain types of lending by between 20 and 40 percentage points.
“While the policies did not slow aggregate mortgage growth, they slowed growth in the targeted mortgage types. Moreover, we notice signs of a positive effect on business credit,” the RBA’s said.
And while it did observe “some initial difficulties and unexpected effects”, the results are overly positive.
However, while the RBA has given its tick of approval to APRA, it has yet to suggest whether regulatory action is imminent. In fact, there are new suggestions that current lockdowns in NSW, Victoria and South Australia could slow house price growth, eliminating the need for the regulators to act.
The latest CoreLogic data is also pointing in this direction, with only 1,849 houses taken to market this past weekend, fetching a preliminary clearance rate of 74.8 per cent.
About the author
About the author
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
