RBA’s Phillip Lowe denies objective of APRA is to control prices and points to supply/demand challenges
RBA’s Phillip Lowe denies objective of APRA is to control prices and points to supply/demand challenges
APRA’s targeting of investors and interest-only lending is not intended to control house price growth, the governor of the RBA has claimed.
Speaking to the Economic Society of Australia in Brisbane, Phillip Lowe commented that “I want to point out that APRA's measures are not targeted at high housing prices. The international evidence is that these types of measures cannot sustainably address pressures on housing prices originating from the underlying supply-demand balance.”
Lowe’s comments will come as news to brokers who have seen their investor clients hit by tough serviceability requirements and higher rates by the banks. Settlements didn’t grow in 2016, according to Deloitte’s Australian Mortgage Report, and 50% of Deloitte’s panel say settlements could fall in 2017. This has begun to impact prices, with dwelling values in Sydney not growing in April, according to Corelogic.
APRA has repeatedly suggested their aim is not to control prices. Chairman Wayne Byres compared the regulator to King Canute holding back the tide, in a speech to CEDA in late April: “I want to emphasise that we are not setting out to control prices. Property prices will go up and they will go down.”
Instead, according to RBA governor Lowe, “increased supply and better transport could be expected to help address the ongoing rises in housing prices relative to incomes.” Lowe also suggested an eventual rise in interest rates could reduce the incentive to borrow, whilst declining to name when this might take place.
With the RBA holding rates in their May cash rate decision on Tuesday, Lowe’s comments on supply and transport imply the Government has the ability to control prices. With the Budget to be unveiled next week, the Australian Financial Review reported in April that the Government was considering limiting the number of properties a single investor could own.
Treasurer Scott Morrison has already dismissed any changes to negative gearing and suggested the Budget would encourage the building of affordable housing.
APRA’s targeting of investors and interest-only lending is not intended to control house price growth, the governor of the RBA has claimed.
Speaking to the Economic Society of Australia in Brisbane, Phillip Lowe commented that “I want to point out that APRA's measures are not targeted at high housing prices. The international evidence is that these types of measures cannot sustainably address pressures on housing prices originating from the underlying supply-demand balance.”
Lowe’s comments will come as news to brokers who have seen their investor clients hit by tough serviceability requirements and higher rates by the banks. Settlements didn’t grow in 2016, according to Deloitte’s Australian Mortgage Report, and 50% of Deloitte’s panel say settlements could fall in 2017. This has begun to impact prices, with dwelling values in Sydney not growing in April, according to Corelogic.
APRA has repeatedly suggested their aim is not to control prices. Chairman Wayne Byres compared the regulator to King Canute holding back the tide, in a speech to CEDA in late April: “I want to emphasise that we are not setting out to control prices. Property prices will go up and they will go down.”
Instead, according to RBA governor Lowe, “increased supply and better transport could be expected to help address the ongoing rises in housing prices relative to incomes.” Lowe also suggested an eventual rise in interest rates could reduce the incentive to borrow, whilst declining to name when this might take place.
With the RBA holding rates in their May cash rate decision on Tuesday, Lowe’s comments on supply and transport imply the Government has the ability to control prices. With the Budget to be unveiled next week, the Australian Financial Review reported in April that the Government was considering limiting the number of properties a single investor could own.
Treasurer Scott Morrison has already dismissed any changes to negative gearing and suggested the Budget would encourage the building of affordable housing.
