The property market find itself at a crossroads.
Banks are being forced to be more conservative with their lending which should cool demand. At the same time, Reserve Bank policy is likely to maintain its low interest rate policy which has been one of the key drivers of this period of growth.
Which way the market will go remains to be seen.
APRA, the banking regulator, has told banks to apply more conservative standards in assessing home loans – changes that some economists predict will reduce borrowing capacity by five per cent.
Lenders are telling Origin Finance that this new policy will kick in as of 1November
And there is speculation that APRA will force more changes on lenders in 2022 – particularly aimed at avoiding would-be borrowers becoming over-extended.
Against that, Westpac has predicted that, with interest rates remaining ultra-low, the Aussie property market will grow by eight per cent next year.
The Reserve Bank has committed to maintain rates low until around 2024 – when inflation is sustainably back in the two to three per cent target band. This is likely to keep the property market rising.
Undoubtedly, APRA’s intervention will take some of the froth out of the market – to avoid would-be borrowers making decisions they regret.
However, with employment remaining strong and post-Covid immigration about to restart, the fundamentals of the property market remain sound for the next couple of years.
If you want to understand how APRA’s changes will impact your borrowing needs, please feel free to contact your Origin broker on 1300 30 67 67.