03 Aug Can int rates still fall?
Last week saw APRA’s announcement requiring the major banks (including Macquarie) to increase capital reserves against their mortgage book. APRA has no property market regulation responsibility, nor is it attempting to temper the market, but it is clearly concerned about the exposure banks have to this sector.
APRA’s direction prompted several banks to increase their variable rates for investment property by between 25 and 30 basis points, however its hard to see what impact, if any, this will have on the market. Some banks have also previously been tightening their LVR’s. AMP closed all residential investment lending after receiving a speeding ticket from APRA as their growth in lending in this sector rose 13.7%, which is above the 10% limit set by the regulator. It is now mooted these changes could clear the way for the RBA to cut the cash rate to assist businesses, without further fueling the residential market.
The residential property market is being driven primarily by population growth, particularly in Melbourne and Sydney. Australia remains a highly desirable place to live and the demand for housing is simply not being met. On a global scale our housing costs remain competitive, so this imbalance is set to continue.
As with all markets however, such issues give people reason to pause and review. The changes by APRA and the banks are broad and national initiatives. Property is a very geographically unique asset class and as we have discussed previously, will move with local dynamics as well as general market fluctuations.
To provide the best insight on your local market, investment property owners should maintain a close eye on vacancy rates, rental growth and new supply levels