New regulations look set to be introduced to cool Australia’s booming housing market, but the Reserve Bank is not yet ready to reveal what they will be.
RBA assistant governor Dr Malcolm Edey has told a Senate committee that loans to investors currently account for close to 50 per cent of new housing loan approvals.
With approvals rising by 90 per cent in the past two years for loans in NSW, the RBA believes this market activity is becoming “unbalanced”.
Asked what regulatory tools might be used to cool the market, Edey refused to “rule anything in or out” but said it would be determined by the banking watchdog, the Australian Prudential Regulation Authority.
“The tools we are talking about need to be carefully targeted,” Edey told the committee in Canberra on Thursday.
“We have said we think there is an imbalance in the form of excessive activity by investors in the market. It is out of proportion with their normal share of the market.”
Edey also told the committee that an emphasis on increasing the supply of housing would assist those currently shut out of the market.
“Targeted assistance can certainly help particular groups such as first-home buyers, but without a supply-side response, any generalised increase in demand will just be capitalised into prices.
He said housing affordability had fluctuated between around 20 and 30 per cent of disposable incomes in the past three decades.
“It has been rising recently and is now at the upper end of its recent range,” he said.
There were some signs Wednesday that the market might have paused.
RPData’s latest figures showed dwelling values across Australia’s capital cities were virtually flat over the month of September.
The RP Data CoreLogic Home Value Index recorded a 0.1 per cent rise in values over the month – a 2.9 per cent capital gain over the third quarter of 2014.
“The flat result for September masks the fact that five of Australia’s capital cities recorded a fall in values over the month whilst only Sydney (+0.8%), Brisbane (+0.7%) and Adelaide (+0.9%) recorded an increase in dwelling values over the month,” the report said.
Additionally, Adelaide recorded a solid increase in values over the September quarter, posting a 3.1 per cent capital gain.
Dwelling values are now 9.3 per cent higher over the 12 months to the end of September 2014, with every capital city recording an increase in dwelling values over this period.
Sydney values are driving the growth trend, increasing by 14.3 per cent over the past 12 months.
A substantial gap exists between Sydney and the next best performer, Melbourne, where dwelling values increased by 8.1 per cent. Darwin was the third strongest performer over the past year with a 7.1 per cent capital gain, followed by Brisbane at 6.4 per cent and Adelaide at 5.8 per cent.
