Pilbara News - - Lifestyle - Hay­den Groves Hay­den Groves is the pres­i­dent of the Real Es­tate In­sti­tute of Western Aus­tralia.

Af­ter com­ments from the Re­serve Bank of Aus­tralia last month that there had been a “build-up of risks as­so­ci­ated with the hous­ing mar­ket”, con­jec­ture has turned to whether the Aus­tralian Pru­den­tial Reg­u­la­tion As­so­ci­a­tion would step in to take the sting out of the na­tional prop­erty mar­ket by tight­en­ing lend­ing con­di­tions for ex­ist­ing home own­ers, first-home­buy­ers and in­vestors.

These com­ments from the RBA are largely in re­sponse to the Sydney and Melbourne prop­erty mar­kets, where sales ac­tiv­ity re­mains hot and house prices con­tinue to rise. While there may be some merit in ap­ply­ing tougher rules in these mar­kets, plac­ing blan­ket lend­ing re­stric­tions across all States and Ter­ri­to­ries is the wrong pol­icy re­sponse.

The neg­a­tive im­pact on WA

WA’s econ­omy and prop­erty mar­ket has faced its fair share of chal­lenges over the last cou­ple of years.

Since the highs of the min­ing and pop­u­la­tion boom and its sub­se­quent slow­down, real es­tate prices in WA have soft­ened con­sid­er­ably with sales ac­tiv­ity halv­ing over the last decade.

Any knee-jerk re­ac­tions to en­force new lend­ing re­stric­tions would have a sig­nif­i­cant detri­men­tal ef­fect on our local prop­erty mar­ket, which is just start­ing to show signs of sta­bil­i­sa­tion.

It would also have a neg­a­tive ef­fect on hous­ing af­ford­abil­ity in WA, which re­mains a le­git­i­mate con­cern for many West Aussies de­spite record low in­ter­est rates and favourable buy­ing and rent­ing con­di­tions.

Even if reg­u­la­tions are only ap­plied to in­vestors, it would still im­pact on hous­ing af­ford­abil­ity in WA.

Cur­rently, lend­ing fi­nance for in­vest­ment makes up 35 per cent of all lend­ing in WA — a sub­stan­tial pro­por­tion of our mar­ket.

If, as a re­sult of tight­en­ing reg­u­la­tions, banks choose to in­crease bor­row­ing costs for in­vestors, this would leave land­lords with no choice but to pass the ad­di­tional costs on to ten­ants.

Banks need to be cau­tious

When try­ing to man­age lend­ing cri­te­ria, the banks need to be mind­ful that any in­crease to lend­ing rates will likely cause the WA prop­erty mar­ket to cool fur­ther. Un­like Sydney and Melbourne, WA has ex­pe­ri­enced a cor­rec­tion.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.