Residential Property Boom in Sydney & Melbourne Over

The regulatory body APRA has confirmed restrictions placed on lending for investment loans introduced last year has achieved its desired results with the objective of maintaining a10% growth in investor lending is reducing as confirmed by the APRA chairman at senates estimates hearing.

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At the aggregate level demand seems to have subsided so the general dynamics in the market suggest it is potentially becoming redundant, although there are some institutions still growing quite quickly.

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Lenders are beginning to accelerate their investor portfolio’s by removing the interest margins loaded between 45 and 75 basis points bringing them in line with owner occupier rates. We have seen the drop in lending growth in the investor segment that has resulted in an impact on property price growth. With property prices coming down lending per property has been reduced slowing the growth of lenders portfolio’s.

Interest only investment loans are back and 2nd tier lenders have already reduced rates to attract new business. Adelaide has been the most aggressive cutting interest rates by up to 75 basis points.This is an opportunity for those investors who were pushed out of the market to re assess their financial position as debt servicing will be back to where it should be for this segment.

Core logic confirmed that residential property prices have fallen in Sydney recording an annual fall for the first time since 2012 with other capital cities also experiencing negative growth.

Overall we can say the restrictions placed by the regulatory body has worked however, there will be further fine tuning as we go.

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