Leading housing economist slams investor crackdown

Leading housing economist slams investor crackdown

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07 September 2015 by Emma Ryan 0 comments

A prominent economist has called on Australia’s prudential banking regulator to prove that the country's housing market really does need fixing.

Domain Group senior economist Dr Andrew Wilson said APRA had not provided detailed modelling to show why it believed the investor market was overheated.

“Where's the heat? I don't understand where the heat is,” he said. “We have the lowest level of mortgage defaults we've seen. Affordability is still below average levels.”

Australian markets have a historical reputation for “orderly growth and correction phases”, according to Dr Wilson.

Dr Wilson said the only noteworthy issue had been the low level of first home buyer activity in Sydney – but that this had been caused by the high levels of foreign investor activity, and that the Sydney market was starting to cool anyway.

“We've had interest rates on hold for four months, so that means affordability has plateaued and price growth will plateau as a consequence,” he said.

“This is the nature of our housing markets and we're very fortunate that we have those in-built stabilisers in our housing market. I think once we see policymakers interfere in that process, the downstream consequences are really problematic."

APRA announced last December that one of its “specific areas of prudential concern” would be any bank growing its investor lending by more than 10 per cent per annum.

However, Dr Wilson questioned the science behind this specific speed limit.

“I don’t think we've had a full and a detailed modelling and explanation as to the nature of the policy shift and the details as to the actual quantities that have been determined that would be a so-called risky level of investor lending in our market,” he said.

RE/MAX managing director Michael Davoren said there is a “very real danger” in APRA’s decision to implement nationwide regulation based on conditions in limited parts of the country.

“Everything is not same-same across Australia. There is no boom evident in most places outside Sydney and Melbourne – and even within those markets, it’s not in all suburbs,” he said.

“There should be more engagement with financial and real estate industries before decisions are reached.”

Mr Davoren said the “vast majority” of markets don’t need cooling, and that some are already deflated.

“Don’t strangle a market when and where you don’t need to,” he said.

Markets in Brisbane, Adelaide, Perth and Canberra, let alone Australia’s provincial and regional centres, are not in the same ball park as those Sydney and Melbourne markets that many commentators focus on.”

[LinkedIn: Has the investor crackdown affected your sales volumes?]

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