Property investor surge could see regulator step in, economists say

The total value of investment housing commitments increased 3.2 per cent on a seasonally adjusted basis over June, Australian Bureau of Statistics Housing Finance data released on Tuesday shows.

This followed a 5.3 per cent increase in investor housing commitments in May.

And if this level of investment growth continued for “another couple of months”, it would likely cause the Australian Regulation Prudential Authority to step in again to curb lending, AMP Capital chief economist Shane Oliver said.

The regulator introduced a 10 per cent annual growth limit on bank loans to property investors in December 2014.

Lenders began to react in mid-2015 by introducing policy changes and a sharp fall in investment activity soon followed.

If investment lending growth pushed back towards this 10 per cent level, APRA would “probably issue another directive”, Dr Oliver said.

“There’s a risk APRA might consider lowering the threshold to 5 to 7 per cent … 10 per cent always seemed a little high to me,” he said.

The June resurgence in investors was partly the result of a rate cut in May, which would have fed through to the statistics, he said.

“[The rate cut in August] wasn’t passed on in full by the banks so may not have the same effect.”

Domain Group chief economist Andrew Wilson agreed any further increases would be a concern for APRA.

“This shows a strong underlying appetite for residential investment regardless of restrictions imposed by the banks,” Dr Wilson said.

“If it continues [at this rate] the banks will be outside the 10 per cent increase and APRA might tell the banks to rein it in,” he said.

Looking at the raw numbers, the total value of investment lending was up 10.6 per cent and there was “no doubt” investment had picked up.

Lower interest rates and fears of missing out on negative gearing during the lead-up to the federal election may have also had an impact on increasing investment figures, he said. However, HSBC chief economist Paul Bloxham believed the investor jump in June was relatively “modest”.

“It’s nothing on the scale of what we saw in 2014/2015 and it’s a good sign the housing market has clearly cooled,” Mr Bloxham said.

“The interest rate cut [in May] is likely to have had some impact,” he said.

Owner occupier activity remained stable over the month.

In July, an investor paid $605,000 for three-bedroom house in Sydney’s western suburb of Glendenning, which sold through Just Think Real Estate principal Edwin Almeida after 20 days on the market.

Despite selling to an investor willing to pay the full asking price, most of the interest in the home was from owner occupiers, Mr Almeida said.

In other suburbs, such as Roselands in Sydney’s traditional investment heartland of the south west, it was “50/50″ interest between investors and owner occupiers.

And no surge in investment activity had been noticed by mortgage brokerage Mortgage Choice, spokesperson Jessica Darnbrough said.

“Over the last 12 months, the percentage of loans written for investors has fallen to approximately 33 per cent of our business,” Ms Darnbrough said. It was 37 per cent over the 12 months prior.

“While some banks are keen to play in the investor space at the moment, others have continued to tighten their policies,” she said.

Aug 10, 2016 / Sydney Morning Herald