Hot market getting hotter
Who is going to put a lid on a hot property market? Not APRA, says Chair. Photo – Canva.
  • APRA Chairman Waye Byres said the regulator is committed to financial stability, not house prices
  • Regulator not ready to impose new lending restrictions, but are watching the housing market 'closely'
  • RBA Governor is also concerned with watching lending standards, saying it is important they do not deteriorate

Under scrutiny from Parliament yesterday, Australian Prudential Regulation Authority (APRA) chairman Wayne Byres said they are not about to impose new lending restrictions in face of rising house prices.

As reported on The Property Tribune, soaring house prices, alongside the Reserve Bank of Australia’s (RBA) dovish commitment to employment has put the focus on the financial regulator to perhaps apply the brakes to Australia’s booming property market.

However, Mr Byres reminded the parliamentary committee that the regulator’s primary responsibility is the stability of the financial system, not surging house prices.

“It’s not our job, and it’s never been our job, to solve the problem of rising house prices.”

Wayne Byres, Chairman, APRA

However, the prudential regulator is watching for increased risk-taking by the community and financial sector, and any deterioration in lending standards.

Mr Byres said it is not evident at this point that lending standards have worsened, despite new mortgage loans and the leverage of these loans climbing to record highs.

“That is not to say it won’t emerge, but it’s not obvious at this point,” he told Parliament.

Mr Byres further argued that the rising activity in the housing market was being driven by first home buyers.

This created a different scenario to the one that forced the regulator to curb investor and interest-only loans in 2014 and 2017, which not only kept young people out of the housing market but also generated potential financial system instability.

The Council of Financial Regulators – which includes the RBA, Treasury, and the Australian Securities & Investments Commission – are also watching the situation closely.

The metrics they will be keeping an eye on include:

  • The extent to which housing credit growth is outpacing income growth, and
  • Share of lending at high loan-to-value ratios and high debt-to-income levels.

Furthermore, RBA Governor, Philip Lowe has been very clear that the central bank does not target house prices.

He echoed Mr Byre’s comments, saying it was important that lending standards do not deteriorate, and that he is ‘keeping a close eye on them’.

“What would concern me, if we saw on the back of these rising asset prices, lending standards deteriorate and people go into the bank and borrowing ridiculous amounts of money in a speculative boom. We are not at this point, but we are watching carefully,” said Dr Lowe.

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