At Approved Financial Planners, we combine mortgage broking and financial planning into a “one-stop” shop for Perth area residents. Recently, the Australian Prudential Regulation Authority (APRA) issued a memorandum to lenders demanding that they adhere to a 10% cap on the growth of property investment lending growth.*
Lenders are doing this by making it more difficult for property investors to obtain loans. The intent is to slow areas such as Sydney, which is in an extremely strong growth cycle, while allowing the rest of the economy to flourish under the record low RBA cash interest rate. *
According to Shane Oliver, Chief Economist for AMP Capital, the term for this is “macro prudential regulation” and was popular before the financial deregulation of the 1980’s. It refers to using prudential lending controls as a tool with which to influence the economy.*
According to Mr Oliver, “time will tell” whether or not the 10% cap will help APRA achieve its goal of boosting the entire economy. While APRA is demanding that lenders adhere to the 10% growth rate, compliance is officially voluntary. Mr Oliver believes that lenders will comply so they don’t force the APRA to create more regulations. *
What Does it Mean for Perth Investors?
Mr Oliver sees it becoming more difficult for investors to obtain loans for housing. He sees it as slowing down price growth, but doesn’t believe prices will drop.*
For Perth property investors, it means that it is going to be more important than ever to have a great financial planner and a great mortgage broker. Mr Oliver sees market uncertainty ahead in all capital cities except Sydney and Melbourne, with a chance that other capital cities such as Perth could see a market slowdown.*
At Approved Financial Planners, we pride ourselves in keeping up to date on all market trends and developments. To learn more or for an individual consult, call us today: 08 6462 0888.
*AMP Capital, 29 May 2015. “Dust off the history books – it’s back to the past to control the property cycle.”