APRA is removing the 10 per cent ‘speed limit’ on investor loan growth.
Photo: Louise Kennerley
The banking regulator is axing a 10 per cent speed limit on bank lending to property investors, saying the cap has served its purpose and improved credit standards.
With Sydney house prices falling and credit growth slowing, the Australian Prudential Regulation Authority on Thursday said it would remove the cap for bank boards that could prove they had been following its guidelines on prudent lending.
In late 2014, amid a surge in borrowing by property investors and rapid house price growth, APRA took the rare step of setting a 10 per cent limit on the annual growth in banks’ housing investor loan portfolios.
The measure has rocked the mortgage market in recent years, prompting banks to jack up interest rates for housing investors, and demand borrowers stump up bigger deposits.
But on Thursday, APRA chairman Wayne Byres said it was prepared to remove the measure because there had been an improvement in lending standards and a slowdown in credit growth.
“The temporary benchmark on investor loan growth has served its purpose. Lending growth has moderated, standards have been lifted and oversight has improved,” Mr Byres
Even so, the regulator will retain a separate 2017 policy that requires banks to limit their new interest-only lending to less than 30 per cent of all new home loan approvals.
APRA also said there was “more to do” in improving other aspects of banks’ lending, including how they assessed borrowers’ expenses, their existing debts, and the approval of loans that fell outside of banks’ formal lending policies.
APRA said it expected banks to introduce limits on the proportion of new lending that could be done at “very high” debt-to-income levels.
“In the current environment, APRA supervisors will continue to closely monitor any changes in lending standards,” Mr Byres said.
“The benchmark on interest-only lending will also continue to apply. APRA will consider the need for further changes to its approach as conditions evolve, in consultation with the other members of the Council of Financial Regulators.”
Queensland Attracts UK Property Seekers
Research by realestate.com.au showed that searches for property in Queensland climbed by nearly a third in December compared to the same period in the previous year. This was driven largely by British people who are flocking to one of the most populous states in the country, according to a report by news.com.au.
The study found that property searches originating from the UK increased 31%, with the Sunshine Coast suburbs of Noosa Heads, Buderim and Mooloolaba as popular picks among potential buyers.
New Farm, Redcliffe and North Lakes, meanwhile, topped the list of the most in-demand suburbs in Brisbane.
Nerida Conisbee, Realestate.com.au chief economist, said Queensland, specifically its beachside properties, held the top spot in terms of total search activity among UK property seekers.
“The Hemsworth impact seems to be impacting the view of Byron Bay with this the most searched by UK property seekers in December 2018 — the number tripling from December 2017,” she said.
Universal Buyers Agents Director Darren Piper said that the chaos surrounding Brexit in Britain was enticing overseas buyers to explore the Australian property market.
“House prices in London have fallen for the fifth quarter in a row. It’s natural for investors to look for safe havens in times of uncertainty,” he said.
Australia’s property market has consistently grown over the past decade, with homes in Sydney, Brisbane and Melbourne reaching record prices.
“It’s the perfect time for people to get their foot in the door and it’s a great time as a homeowner to explore your options, maybe make a move or stay the course,” said Piper.
Where it’s cheaper to buy than rent: It’s Ipswich’s time to shine
SHUT out of the Brisbane market? Don’t despair. You can still bag a bargain in Ipswich as it shakes off its stigma as the city’s poor cousin.
IT HAS played second fiddle to Brisbane for years, but finally, it is Ipswich’s time to shine.
Long regarded as the river city’s poor cousin, the “Switch” has shaken off its stigma and is forging a name for itself as the state’s property bargain capital — where you can get a house for less than your weekly rent.
New figures from realestate.com.au have revealed the suburbs across Queensland where it is now cheaper to buy than rent and eight of the top 20 are in the Ipswich growth corridor.
In Ebbw Vale, where the median house price is $248,500, it works out to be $386 cheaper to own a home in the suburb than to rent one.
And in the burgeoning masterplanned community of Ripley, where it costs $1600 a month on average to rent of home, it only costs $1230 a month on average to own one.
It comes as Brisbane’s housing market has recorded its strongest annual rise in rents in three years.
After months of flat growth in rental properties, analysis of the latest CoreLogic data by realestate.com.au shows house rents increased 2.4 per cent in 2018, while the cost of leasing a unit became 2.6 per cent more expensive.
A rare combination of low interest rates, a rising population and fewer investors and new developments is starting to put upward pressure on rents in the sunshine state and industry experts say now is the time for long-term renters to buy.
Realestate.com.au chief economist Nerida Conisbee said the only way was up for rents in the city, as underlying demand in the Brisbane market began to absorb rental supply.
Ms Conisbee said she was surprised by the “sheer number of suburbs” in greater Brisbane where it was cheaper to buy than rent.
“There’s quite a large number of them,” she said.
“Now is actually a good time to look to buy because we are looking to see further increases in rental levels.
“The reason being we have fewer new developments going ahead and also fewer investors in the market.”
Caitlin and Bryn Williams decided to buy a home in Ripley when they realised they could pay about the same in loan repayments as they were in rent.
After previously renting in Ipswich, they bought a brand new, four-bedroom house for just over $350,000 in the Ecco Ripley estate, where stage one of the $1.5 billion Ripley Town Centre has just been completed.
“We’re happy not to be renting anymore,” Mrs Williams said.
“What we were paying in rent, we were paying off someone else’s mortgage.”
Ripley is on track to become Australia’s biggest masterplanned community — home to 120,000 by 2041.
CoreLogic figures show the suburb’s median house price has grown by nearly 20 per cent in the past 12 months.
Mohammad Bassiri of Ray White Springfield Lakes said people were starting to realise it worked out cheaper or just as expensive to buy a home in the Ipswich region as it was to rent one.
Mr Bassiri said a friend of his recently moved from a rental at Springfield Lakes to buy a three-bedroom house at South Ripley for $320,000 because he realised the mortgage repayments were the same as his rent payments.
WHERE IT IS CHEAPER TO BUY THAN RENT IN QLD
Suburb Median house price Monthly loan repayment Monthly rent Difference
1. Lamb Island $110,000 $405 $997 $592
2. Macleay Island $182,000 $669 $1,192 $523
3. Russell Island $165,000 $607 $1,083 $476
4. Kilcoy $272,000 $1000 $1,452 $452
5. Mundoolun $576,000 $2,118 $2,548 $430
6. Laidley $237,500 $873 $1,300 $427
7. Woodford $327,250 $1,204 $1,603 $399
8. Plainland $375,000 $1,379 $1,768 $389
9. Ebbw Vale $248,500 $914 $1,300 $386
10. Ripley $335,000 $1,232 $1,603 $371
11. One Mile $242,500 $892 $1,257 $365
12. Blackstone $314,000 $1,155 $1,517 $362
13. Leichhardt $243,375 $895 $1,257 $362
14. Lowood $251,750 $926 $1,278 $352
15. Brendale $270,000 $993 $1,343 $350
16. Riverview $238,500 $877 $1,213 $336
17. Cedar Vale $498,000 $1,832 $2,167 $335
18. Goodna $310,500 $1,142 $1,473 $331
19. Loganholme $381,900 $1,405 $1,733 $328
20. Redbank $329,000 $1,210 $1,538 $328
Originally published as Where it’s cheaper to buy than rent
Labor Unveils $6.6bn Affordable Housing Plan to Build 250,000 New Homes
Labor has announced a ten-year plan to build 250,000 new homes across Australia, including 20,000 during its first term in government if it wins the election.
The $6.6 billion investment would see 250,000 new homes for low income and working families, key workers such as nurses, police, carers and teachers and women over 55, the fastest emerging group of Australians at risk of homelessness.
Subsidies of $8,500 per year would be offered to investors building new homes in return for cheaper rent for eligible tenants.
Opposition leader Bill Shorten unveiled the multibillion-dollar plan in his address yesterday at Labor’s three-day national conference in Adelaide.
“Building more affordable housing is infrastructure policy. It is cities policy. It is jobs and productivity policy,” he said.
The plan would see a family paying the national rental average save up to $92 each week.
“When you provide an affordable home for hard-working people, you give them the level playing-field and fair start they need,” he said.
Shorten said Labor would work with the states and territories, local councils, and community housing providers to make sure the rollout of homes were built “where they’re needed most” and would “go to the people who need them most”.
“Not foreign investors, nor international students.”
The new homes would be accessible for all ages and for people with a disability, with Shorten describing the new homes as “more energy efficient, meaning lower power bills”, also offering a rental discount of 20 per cent.
Describing Labor as a “party of home ownership, and a party of affordable housing and community housing”, Shorten used the speech as an opportunity to call on industry super to “step up” and invest in affordable housing projects.
And of course, the opposition leader touched upon the hotly debated campaign election issue: negative gearing.
“This is a boost for renters and for the liveability of our growing suburbs… Alongside our plans to make negative gearing fairer, it will drive a boom in construction jobs and apprenticeships,” Shorten said.
A recent report published by the Australian Housing and Urban Research Institute (AHURI) found Australia needed to triple its social housing by 2036, faced with a shortfall of 433,000 social housing dwellings.
Property industry bodies welcome Labor’s announcement
Property Council chief executive Ken Morrison welcomed the incentives, but said they are “no substitute” for the supply of housing which is funded by 2.1 million property investors, “including those who access negative gearing”.
Housing affordability remains a critical issue for many Australians, an issue Morrison says is often overshadowed in the media by Melbourne and Sydney’s cooling markets.
“It makes sense to harness the investment capacity of the private sector to deliver affordable housing,” Morrison said.
“Labor’s incentives for investors to deliver affordable housing will make a contribution to meeting that need while also providing a boost to our construction industry, a key driver of economic activity.”
Planning schemes, land supply, and property taxes, which make up around 25 per cent of the cost of a new house are all part of the housing affordability mix, Morrison added, “there is no single ‘silver bullet’ solution”.
Urban Taskforce chief executive Chris Johnson said many different approaches are needed to tackle the hugely complex housing affordability issue.
“State and territory governments still have a responsibility to ensure that enough appropriately-zoned land is available in inner-ring suburbs to ensure sufficient housing supply,” Johnson said.
“Infrastructure levies must be kept under control to ensure that these do not add to the cost of housing production.”