In a report released by Australian banking giant Australia and New Zealand Banking Group (ASX:ANZ), the property market appears to be cooling off due to more strict loan policies. ANZ economists David Cannington and Felicity Emmett say it is difficult to quantify the exact affect of the policies, but that it will surely influence the supply of mortgages to some degree. In the recent months, the Reserve Bank of Australia has shown concern over the rapidly growing property market, especially in the Sydney property market.
The shift in attitude among Australian banks coincides with new regulations enacted at the end of last year. The Australian Prudential Regulation Authority (APRA) enacted a regulation that housing growth cannot exceed 10 per cent. This regulation was largely seen a response to the fast and easy money in mortgage loans. The credit rating agency Moody supported the decision in a recent announcement. “In our view, these initiatives are credit positive since they reduce the banks' exposure to a higher-risk loan segment,” said Moody’s executive Ilya Serov.
Westpac Banking Corporation (ASX:WBC), another Australian banking giant, recently sent out a memo to its businesses stating it will cut property investment loan discounts. The memo was a response to data showing that the bank’s property investment lending was growing at 11.5 per cent, higher than the APRA suggests. Recent data from the RBA is hinting that the new regulations are already having an affect on the property market. Seasonally adjusted figures show that growth has slowed to an annualized pace of 10 per cent over the first quarter of 2015. "The additional lending constraints are likely to slow down investment lending further," Mr Serov said.
Author: Matthew Dibb
May 26, 2015
Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.