A property association has warned regulators to look closely at housing data across the economy before introducing macro-prudential measures that could limit home lending activity.
Last week, APRA outlined steps it plans to take to reinforce sound residential mortgage lending practices. One specific area of concern the regulator emphasised was the strong growth in lending to property investors.
“Given the currently very strong growth in investor lending, supervisors will be particularly alert to plans for rapid growth in this part of the portfolio. For example, annual investor credit growth materially above a benchmark of 10 per cent will be an important risk indicator that supervisors will take into account when reviewing ADIs’ residential mortgage risk profile and considering supervisory actions,” APRA said in its letter to ADIs.
However, Executive Director of the Residential Development Council Nick Proud says APRA needs to look at the bigger picture.
“Alongside foreign investment, domestic investment loans activity has allowed developments to proceed quicker and if future macro-prudential measures are to be introduced then starts may be adversely effected,” he said.
“There needs to be a greater understanding about what any future macro-prudential decisions made by APRA will do to housing supply across all states and market segments. These decisions should be made in parallel with consideration of other strategies that stimulate housing supply activity across first home owners, owner occupiers and seniors.”
In October 2013, the Reserve Bank of New Zealand put macro-prudential policies in place to curb risky lending in the residential mortgage market. However, last month the central bank announced it would be winding back its macro-prudential intervention after it became clear it was hurting other areas of the property market. Proud says our regulators need to learn from our neighbour’s experience.
“New Zealand introduced macro-prudential tools which have not worked and there is little understanding of how such instruments have affected investment in the Auckland market, except to note that first home buyers were shut out,” he said.