The Real Estate Institute of Western Australia (REIWA) and the Urban Development Institute of Australia WA Division (UDIA WA) have strongly criticised regulatory talk of tightening home lending conditions across the country.
Fearing an imminent bubble burst, both the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) have hinted that tighter restrictions on Aussie property investors may be on the way.
Hayden Groves, president of REIWA, called this a “knee-jerk reaction” to runaway house prices in the eastern states and territories, particularly Sydney and Melbourne, and did not take into account the varied market circumstances across all the states and territories.
“Western Australia’s property market has softened considerably over the last couple of years. If lending conditions are made tougher for existing home owners, new home buyers and investors in WA, this will have a detrimental effect on our local housing market which is just starting to show signs of stabilisation,” Groves said.
Allison Hailes, CEO of UDIA WA, said imposing further lending restrictions may make sense on the east coast, where the market is heated; however, in Western Australia’s softer property market, such measures would do more harm than good.
“Decision makers in the eastern states need to take WA's delicate economic and property market situation into account before introducing any changes, otherwise we could see the green shoots that are just starting to emerge killed off,” she said.
Groves pointed out that housing affordability remained a significant issue for Western Australians due to the recent slowdown in the mining sector and other challenging economic conditions. “Tightening lending conditions in WA will have an adverse effect on affordability for West Australian home buyers, owners and investors,” he said.
Lending finance for investment represents a significant proportion of the Western Australian property market, with 35% of all lending in the state attributed to investors.
“Even if this regulation is only applied to investors, increasing borrowing costs would mean investors have no choice but to pass this down to tenants and would also limit the number of investors entering the market,” Groves said.
“Not only will stricter lending conditions negatively impact potential purchasers, they will impact directly on the construction of new homes and therefore jobs,” Hailes said.