Guest The Pom Queen Posted August 10, 2015 Share Posted August 10, 2015 Nick Hart bought four homes in Adelaide in less than two years, and was getting ready to make an offer for a fifth, when a regulator-inspired move to cool the sizzling Australian property market spoiled his plans. "I went to my bank for my next home loan and their response was eligibility assessments have changed, and they can't lend more to me just yet," said the 37-year-old sales manager at a software services firm. Hart said the bank told him his existing loans, equivalent to 93 percent of the value of his A$1.8 million ($1.3 million) properties, need to be reduced before he can borrow any more. Last month, Australian banks raised interest rates for property investors and introduced tougher loan-to-value standards in response to a move by regulators to rein in the riskier corners of the country's house price boom. With interest rates stuck at record lows due to the slowdown in the wider economy, the central bank and the Australian banking regulator have been grappling with ways to prevent a property price bubble. There are signs that the market may be cooling. Inquiries from property investors dropped by a quarter last month, said Paul Bevan, a Melbourne-based mortgage broker. Price gains in Sydney, the city which has seen the fastest increases, are expected to ease to about a third of the annual pace of 18 percent seen in the year to July 31, according to a Bloomberg survey of six market analysts. Softening trend "All ingredients are in place now to spook the Sydney house-price momentum," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. "It is better to cool the market rather than wait for the bubble to burst." Low mortgage rates and a flood of Chinese investment have propelled prices 29 percent higher across Australia in the past three years, according to research firm CoreLogic Inc. Prices in Sydney have jumped 46 percent over the same period. Last year, the Reserve Bank of Australia called the housing market unbalanced, and the Australian Prudential Regulation Authority urged banks to limit the growth in investor home loans, which make up a record 53 percent of all mortgages, according to latest government figures. The turning point came last month, when the banking regulator increased the capital that the banks need to hold against potential mortgage losses to an average of 25 percent, from 17 percent previously. That will force the four largest lenders to add A$12 billion in equity in a year, according to analysts at Goldman Sachs Inc. and Morgan Stanley. Unbalanced Housing In response, banks introduced a number of steps to curb borrowing for investment. They reduced the maximum loan amount they will lend relative to the value of a home, increased the interest rate used to assess borrowers' ability to repay, and reduced the sources of income they would accept in investor borrowing applications. Last month, the three biggest lenders -- Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia and Westpac Banking Corp. -- increased home-loan rates for landlords by as much as much 30 basis points. For the first time since 1997, investors pay more than owner-occupiers on mortgages from those banks. ANZ and National Australia Bank Ltd., the fourth-largest lender by market value, have capped the loan-to-value ratio at 90 percent, down from as much as 95 percent. Safest Bet Investors are "still keen" to enter the property market but they would find it difficult to meet the new loan-to-value rules, said Martin North, principal at Sydney-based Digital Finance Analytics, citing a rolling survey of 26,000 households across the country on financial and property expectations. "While I expect things to slow down through this year and into the next, a price collapse is unlikely when rates are still low," North said. Property investor Hart says homes are still his safest bet though he acknowledges he wouldn't be able to expand his portfolio as fast as he had expected. "By next year, I'm sure the value of my properties will rise further and I'd be able to pay down some of my mortgage," he said. "Once that's done, I can go to my bank for the next one." Link to comment Share on other sites More sharing options...
paisleylass Posted August 10, 2015 Share Posted August 10, 2015 As a wannabe first time buyer within the next 12 months, this is good news. Hope homeowners needing to sell won't lose out too much, but we need price rises at least to slow, or we could be priced out by the time we're ready to buy! Link to comment Share on other sites More sharing options...
newjez Posted August 10, 2015 Share Posted August 10, 2015 The markets are very unbalanced in the different states, so this will be interesting. Link to comment Share on other sites More sharing options...
Parley Posted August 10, 2015 Share Posted August 10, 2015 I have doubts whether it will make much difference in Melbourne and Sydney. It won't impact the Chinese buyers. With the dollar low they can still bring money in cheaply from overseas. Link to comment Share on other sites More sharing options...
paul1977 Posted August 10, 2015 Share Posted August 10, 2015 I have doubts whether it will make much difference in Melbourne and Sydney. It won't impact the Chinese buyers. With the dollar low they can still bring money in cheaply from overseas. You can buy my overinflated house but you can't take my job...!! Australians have double standards regarding Chinese people Link to comment Share on other sites More sharing options...
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