Market and economic conditions beyond our control on the west coast are now set to have an impact on Western Australians. And the Real Estate Institute of Australia (REIWA) and the Urban Development Institute of Australia WA Division (UDIA WA) are not happy about it.
Both REIWA and UDIA WA have called the prospect of tightening home lending conditions across the country a “knee-jerk reaction” to over-inflated market conditions on the east coast, especially the Sydney and Melbourne property markets. REIWA President Hayden Groves said it did not take into account the varied market conditions within Australia, such as WA where the property market has softened considerably over the last two 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,” said Mr Groves.
UDIA WA CEO Allison Hailes agreed saying that imposing further lending restrictions would “do more harm than good” on the west coast.
Affordability continues to be a significant issue for Western Australians due to the recent downturn in the mining sector and challenging economic conditions. However Mr Groves said tightening lending conditions in WA will only make this worse.
35% of lending finance in WA is 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,” said Mr Groves.
REIWA and UDIA WA have joined forces to call on State Treasurer Ben Wyatt to address the issue at a national level.
Brace yourselves for rising interest rates
To rub further salt into the wound, two of the Big 4 banks – NAB and Westpac – announced a decision to lift interest rates out of cycle with the Reserve Bank for both owner occupiers and investors earlier this month. And now there’s talk that the other two banks in the Big 4 – CBA and ANZ – are about to follow suit.
In the last couple of days we have seen news reports suggesting that CBA and ANZ customers should brace themselves for interest rate hikes of more than 20 basis points for investment loans and up to 10 basis points for owner occupier loans.
The rate hike has arrived at a critical time for the banks with many speculating that APRA (the chief banking regulator) is set to introduce a series of measures to slow property growth. As for the motive of the banks, their decision to lift rates is in a bid to keep a lid on growth in loans to property investors and (not surprisingly) to protect their own profit margins. Again the decision has been fuelled by over-inflated growth in Sydney and Melbourne.
After eight years of what economists are calling “subnormal, artificially low interest rates”, it would appear we have now entered a new stage with rising interest rates expected to run for the next five to eight years.