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Category: Housing Industry / Banking / Consumer Finance / Regulation

APRA brakes on property investors appear to be working

Tuesday, 29 Nov 2016 11:11:31 | Stephen Letts

The amount of new lending to investors has tumbled 14 per cent since APRA's crackdown began. (ABC)

The regulator enforced squeeze on residential property investment is continuing to bite, with new loan approvals to landlords slumping 16 per cent from a year ago.

Since the Australian Prudential Regulatory Authority imposed tighter controls two years ago, new investor loans have fallen from $38.6 billion in the 2014 December quarter to $33.2 billion, a drop of 14 per cent.

Over the same period new owner-occupier loans being issued have risen 14 per cent from $54.1 billion to $61.9 billion.

External Link: New investor loans v new owner occupier loans

In December 2014 APRA, with the backing of a Reserve Bank concerned about an investor driven property bubble blowing up, stepped up its regulatory oversight of the banks to keep investment loan growth under 10 per cent a year.

APRA warned the banks to rein in the high-loan-to valuation ratio (LVR) lending practices, introduce stricter affordability tests for borrowers and limit interest-only loans with "very long" terms.

A combination of easy money, historically low interest rates and booming house prices saw new investor lending grow by almost 40 per cent between March 2013 and March 2014.

Despite the investor clamp down, quarterly figures release by APRA show the total residential exposure carried by Australia's banks, building societies and credit unions rose by 7.9 per cent over the year to a record high of $1.46 trillion.

Total owner-occupier loans rose by 12.9 per cent to $949 million, or 65 per cent of all residential loans.

Total investor loans slipped 0.2 per cent to $512 billion.

External Link: Total owner occupier lending v investor lending

The average loan size increased over the year from $244,000 to $255,000.

APRA also appears to be succeeding in targeting riskier very high LVR and interest-only lending.

New lending for LVRs above 90 per cent - measured by the size of the outstanding loan to the value of the property - fell by 19.5 per cent over the year, while LVRs of between 80 and 90 cent rose 5.9 per cent.

The value of new interest only loans fell 15 per cent or $23.9 billion over the year.

AustraliaPlus


 

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