APRA changes to mortgage lending good for housing supply: Chris Johnson

EXPERT OBSERVATION 

The proposed changes by APRA to its guidance on restrictions on borrowers repayment obligations will help the supply of new housing.

The Australian Prudential Regulation Authority (APRA) has proposed changes to its guidance to banks and Authorised Deposit-taking Institutions (ADIs) that will increase the maximum borrowing capacity for borrowers in relation to housing.

The regulator believes that the measures that were introduced at a time of heightened risk can now be reduced.

Rather than using an interest rate of 7% ADIs would be permitted to set their own minimum interest rate floor for use in serviceable assessments. APRA does still propose a buffer on interest rates and while stating that risk has reduced APRA is still concerned about high house prices, low interest rates, high household debt, and subdued income growth.

APRA also commented that there was too big a difference emerging between owner-occupier principal and interest loans compared to investor interest-only loans.

The Urban Taskforce is very supportive of APRA’s proposed changes as clearly house prices have dropped significantly in cities like Sydney and this is reducing confidence in the new housing market.

The re-election of the Morrison Government means negative gearing and capital gains tax will not change so more certainty is coming into the housing market. This greater certainty along with APRAs changes are positive signals for the housing sector.

To fully lift housing supply to the levels needed will also need support at state government level to ensure that levies on new homes are not excessive.

In Sydney the state government’s proposal to lift the cap on local infrastructure contributions from July 2020 could add $60,000 to the cost of each home or apartment. All levels of government must do their bit to ensure housing supply matches the need.

CHRIS JOHNSON is the Urban Taskforce CEO.