The West Australian
Australia’s banking regulator has assured WA Treasurer Ben Wyatt the State’s struggling property market will not be further hit by tougher lending restrictions on prospective homebuyers.
In a letter sent to Mr Wyatt and obtained by The West Australian, the Australian Prudential Regulation Authority said it was not about to consider any extra measures to force banks to clamp down on housing finance.
It came as a report cast fresh gloom over Perth’s housing market, with prices tipped to fall 2.8 per cent this year after a 4.7 per cent decline last year.
Perth house prices are back to levels last seen in 2009. The report by Corelogic and Moody’s Analytics said that despite stabilising commodity prices helping the WA economy, Perth property values would not start to recover until next year.
Tumbling property prices across the country last year have fuelled concerns that a reluctance by banks to lend was damaging the housing market. They also prompted Federal Treasurer Josh Frydenberg to call on banks to provide “affordable and timely” finance as growth in lending hit its slowest rate in 30 years.
APRA’s latest assurance was in response to complaints from Mr Wyatt, who wrote to it last month to warn the watchdog’s “one-size-fits-all” approach was hurting WA’s property sector and the wider economy.
Those complaints centred on APRA’s intervention in the property market, where rapid house price growth in Sydney and Melbourne between 2012 and 2017 led the regulator to impose investor and interest-only lending limits on the big banks.
Mr Wyatt noted that while prices had more than doubled in Sydney and Melbourne since 2006, they had increased 10 per cent in Perth.
Once inflation was taken into account, Perth prices had fallen 15 per cent. He said regulations aimed at the east coast were leaving Perth as collateral damage.
Those fears were reinforced by last month’s midyear review of the State’s finances, which showed that stamp duty on property transactions was forecast to be $211 million lower in 2018-19 compared with the May Budget estimate.
Over the forward estimates to 2021-22, stamp duty was expected to be almost $1 billion lower.
Addressing Mr Wyatt’s concerns, APRA chairman Wayne Byres said he was “conscious that there is no homogeneous housing market in Australia” and that WA had not enjoyed the same “buoyant” price growth as the Eastern States.
Mr Byres also pointed out that APRA had since removed the lending limits because they had “served their purpose”.
“Your letter expresses concern at the potential for further ‘macroprudential’ changes to adversely impact the WA housing market,” Mr Byres said in the letter to Mr Wyatt.
“I confirm that APRA does not see a need in the foreseeable future for additional measures designed to tighten lending practices.
“Having removed these measures, APRA-regulated lenders are now free to manage their portfolios as they see fit, subject of course to meeting their normal statutory and prudential obligations.” Mr Wyatt said yesterday that he was “pleased” APRA had ruled out further tightening of lending standards.
“As I explained to APRA, doing so could adversely affect the WA housing market and local economy,” he said. “The McGowan Government will continue to secure good policy outcomes for WA households.”
The Urban Development Institute of Australia said yesterday that the ingredients were present for a rebound in prices. Tanya Steinbeck, the institute’s WA boss, said there was typically a lag of two years between increased economic activity in the State’s resources sector and an increase in property values.
“Based on the current mineral exploration expenditure figures, UDIA estimates the next market uplift will occur in the next 12 to 18 months,” Ms Steinbeck said.