RBA aims to keep rates low… Moodys: Housing market poses long-term challenge... Auckland investment tax won’t work for Sydney...
Clampdown on lending will keep interest rates low
The major banks' clampdown on lending to landlords will help the Reserve Bank of Australia to keep interest rates at record lows by dampening the investor-led housing boom, economists predict.
According to an article in the Sydney Morning Herald, figures on Tuesday showed tentative signs of slowing in higher-risk parts of the mortgage market that have been worrying the country's financial regulators. Interest-only loans and mortgages with deposits of less than 10 per cent both fell slightly as a share of new loan approvals in the March quarter compared with the previous three months, Australian Prudential Regulation Authority figures showed.
The news comes as the APRA previously demanded investor lending slow to less than 10 per cent a year. In response to that announcements, the country's biggest banks have in recent weeks cut discounts for investors and tightened their credit criteria. ANZ Bank economists said these moves had the potential to curb the growth in housing investor lending.
"This looks as though APRA's step-up in supervision is starting to have some effect," said Felicity Emmett said. “If that's successful, then that's going to give the RBA scope to keep rates lower.”
Moodys: Housing market poses long-term challenge
Growing imbalances in the housing market pose a long term challenge to the credit profiles of Australian banks, says Moody’s in a market analysis, in an article from Business Insider Australia.
“The Australian housing market is characterized by elevated and rising house prices, declining mortgage affordability, and record levels of household indebtedness,” Moody’s says.
However, the ratings agency sees recent moves by the banks to slow investment lending growth as positive. The changes include reducing interest rate discounts for investors and adding caps to loan-to-value ratios. Without that, it says, the increasing proportion of investment and interest-only loans would lead to a weakening of the portfolio quality at the banks, according to the article.
What’s more, investment lending has been growing rapidly since 2013, reaching a record 37 per cent of total new mortgages and fuelling concerns about the sustainability of the housing market.
“Investment loans are also more likely to be interest only and, consequently, are more sensitive to movements in interest rates than loans owner occupied or principal-and-interest loans.”
Auckland investment tax won’t work for Sydney
Housing Industry Association senior economist Shane Garrett has argued that the investment tax measure used in Auckland is not the best solution for Sydney’s housing boom.
New Zealand has set a 33 per cent tax on investment properties bought and sold in two years in the hope of controlling house values and foreign investment activities.
The same dilemmas face Sydney’s housing market, but Garrett said the city already has similar measures in place to address them.
“We have a similar idea in Australia where if you hold an asset … for more than 12 months you receive a 50 per cent discount on your capital gains tax, which encourages people to hold on to assets for longer,” he was quoted as saying by Real Estate Business.
The major banks' clampdown on lending to landlords will help the Reserve Bank of Australia to keep interest rates at record lows by dampening the investor-led housing boom, economists predict.
According to an article in the Sydney Morning Herald, figures on Tuesday showed tentative signs of slowing in higher-risk parts of the mortgage market that have been worrying the country's financial regulators. Interest-only loans and mortgages with deposits of less than 10 per cent both fell slightly as a share of new loan approvals in the March quarter compared with the previous three months, Australian Prudential Regulation Authority figures showed.
The news comes as the APRA previously demanded investor lending slow to less than 10 per cent a year. In response to that announcements, the country's biggest banks have in recent weeks cut discounts for investors and tightened their credit criteria. ANZ Bank economists said these moves had the potential to curb the growth in housing investor lending.
"This looks as though APRA's step-up in supervision is starting to have some effect," said Felicity Emmett said. “If that's successful, then that's going to give the RBA scope to keep rates lower.”
Moodys: Housing market poses long-term challenge
Growing imbalances in the housing market pose a long term challenge to the credit profiles of Australian banks, says Moody’s in a market analysis, in an article from Business Insider Australia.
“The Australian housing market is characterized by elevated and rising house prices, declining mortgage affordability, and record levels of household indebtedness,” Moody’s says.
However, the ratings agency sees recent moves by the banks to slow investment lending growth as positive. The changes include reducing interest rate discounts for investors and adding caps to loan-to-value ratios. Without that, it says, the increasing proportion of investment and interest-only loans would lead to a weakening of the portfolio quality at the banks, according to the article.
What’s more, investment lending has been growing rapidly since 2013, reaching a record 37 per cent of total new mortgages and fuelling concerns about the sustainability of the housing market.
“Investment loans are also more likely to be interest only and, consequently, are more sensitive to movements in interest rates than loans owner occupied or principal-and-interest loans.”
Auckland investment tax won’t work for Sydney
Housing Industry Association senior economist Shane Garrett has argued that the investment tax measure used in Auckland is not the best solution for Sydney’s housing boom.
New Zealand has set a 33 per cent tax on investment properties bought and sold in two years in the hope of controlling house values and foreign investment activities.
The same dilemmas face Sydney’s housing market, but Garrett said the city already has similar measures in place to address them.
“We have a similar idea in Australia where if you hold an asset … for more than 12 months you receive a 50 per cent discount on your capital gains tax, which encourages people to hold on to assets for longer,” he was quoted as saying by Real Estate Business.
