Modelling by Dixon Advisory has shown that property investors may not be able to have an investment portfolio unless they have funds in reserve for every year of their loans under APRA's tighter lending standards.
Investors may have to set aside more capital to secure their loans or be priced out of the purchasing market.
The Australian Prudential Regulation Authority this week instructed the main four banks and Macquarie Group to hold billions of dollars in extra capital to cover mortgage loans, with the change potentially passed onto customers in higher borrowing costs.
The changes will have significant ramifications for some investors who could be priced out of the market, Dixon Advisory's Nerida Cole told The Australian Financial Review.
The managing director of Dixon Advisory's financial advice division suggests some investors will need a larger deposit to reduce their loan-to-value ratio or buy cheaper properties.
"For borrowers who are in a strong financial position, [and have a] particularly strong surplus cash flow and low debt levels, they may be able to acquire the property of their choice," said Nerida Cole.
Modelling by Dixon Advisory has shown an investor who wants to buy a $1 million property could have to prove they will generate an additional $22,500 in cash a year under new standards, assuming a 20% minimum deposit.
An investor with a $500,000 property could need up to $12,300 in additional cash a year, in calculations that assume principal and interest repayment at 7%, rental income of 4% (before the bank reduction of 20% is applied) and a marginal tax rate of 49%.