Large wholesale mortgage broker AFG has warned that lending requirements designed to cool the Sydney and Melbourne housing markets are hampering other Australian cities in need of property and construction investment.
AFG chief operating officer David Bailey said investor and first-home-owner loan sizes had dropped dramatically since tougher lending policies were put in place.
“The rest of the country has become the victim of NSW’s [loan-to-value] problem,” Mr Bailey said in Perth.
“For the economies that rely on a greater level of construction it’s a pretty hard pill to swallow.”
Australian Finance Group chief operating officer David Bailey says lending restrictions are hurting non-property-boom states.
Loans to property investors rose by 9.7 per cent in the year to October, Reserve Bank figures show. This is below the prudential regulator’s target of restricting investor lending growth to less than 10 per cent.
The Australian Prudential Regulation Authority is also requiring the big four banks and Macquarie to hold more capital against their mortgage books, in another move that restricts lending growth.
While the measures might help curb excessive speculative buying in Sydney and Melbourne, other state capitals, including Perth and Brisbane, are experiencing subdued property conditions.
Home values are down 4.5 per cent in Perth during the past 12 months, CoreLogic RP Data says, and up a modest 4.3 per cent in Brisbane. Prices in Sydney and Melbourne are up 13 per cent and 11.8 per cent respectively.
The dour conditions in Perth’s property market have come at a difficult time for the state economy, which has entered its third consecutive fiscal year of shrinking state final demand – a measurement of consumption and investment but not exports – in the aftermath of the mining boom.
Real Estate Institute WA (REIWA) president Hayden Groves said the prudential regulations, coupled with public discussions around whether negative gearing should be abolished, weren’t helping.
“The policy settings were designed for Sydney and Melbourne markets,” Mr Groves said.
“It hasn’t done the Perth market or Brisbane market any favours.”
There are more than 16,000 houses, units and land parcels for sale in metropolitan Perth, REIWA says, representing a 22 per cent increase from one year ago.
Most property experts believe equilibrium is achieved in Perth’s residential market when there are about 12,000 properties on the market, which means there is an abundance of stock.