A property lobby has cautioned against the implementation of blunt weightings on residential loans aimed at deterring property investment.
“Weighting of loans that add significant costs to borrowers should be considered with care to ensure that residential development activity is not halted from current optimum levels,” Nick Proud, executive director of the Residential Development Council at the Property Council of Australia said.
“This result would leave the economy bereft of growth drivers, depleting State and Federal taxation of a central revenue generator in 2015, which is akin to the actual scenario outcome that the weighting measure seeks to prevent.”
As the Australian $1.3 trillion mortgage market continues to expand, prudent management of our banking sector has been in both APRA and the RBA
’s sights. The most recent figures released by the Australian Bureau of Statistics revealed that the value of housing lending rose by 2.3% in September.
While regulators are concerned what this heavy reliance on mortgage loans might do to the economy in the face of a market correction or global shocks, many in the industry agree with the Property Council of Australia, and are welcoming the growth.
“From the stimulus-fuelled period around the GFC, lending for new housing is at its highest in 20 years. That is a healthy result in terms of the short term outlook for new home construction,” Harley Dale, chief economist at the Housing Industry Association said.
Proud says the property lobby supports the role of APRA in its oversight of lending institutions and regular mortgage book stress tests, however, there is no evidence to suggest that domestic housing lending is not being managed prudently.
“Across the indicators home savings are strong, mortgage to income ratios remain roughly on plateau, low doc loan rates are minimal, and people are paying down their mortgages at higher than set rates.
“The right policy levers are crucial to avoid perverse outcomes, such as greater difficulty for first home buyers entering the market and a reduction in new supply caused by a drop-off in investment and weighting measures should only be considered where there is systemic and likely risk,” he said.