Recent attempts by regulators and the banks to temper property investment activity across the country are missing the mark and will have unintended consequences, a peak body has warned.
In recent weeks a number of lenders, including the big four banks, have changed their lending and serviceability criteria for property investors in response to concerns from the Australian Prudential Regulation Authority (APRA).
In May, Wayne Byres, chairman of APRA, said as “housing-related risks have potentially grown”, the regulator has sought to “turn up the dial” in terms of scrutiny and management.
The Property Investment Professionals of Australia (PIPA), however, said that having the banks tighten their lending to property investors – by either changing their lending criteria or charging investors more for loans – won’t have the desired effects.
Ben Kingsley, chair of PIPA, said APRA’s approach was not “the sound solution” to cooling the Sydney and Melbourne property markets over the long term.
“While we welcome and endorse a responsible approach to lending, we are concerned about APRA’s market intervention and don’t believe their lender-by-lender approach is the most effective means to control the property market,” he said.
“We recognise that marketplaces like Sydney and Melbourne are posing concerns, as new and existing investors are potentially speculating in trying to capitalise on boom conditions, and we have been active in warning consumers to be careful about this.
“However, there are plenty of other property markets in Australia and these measures are an unfair imposition on investors who want to invest in other parts of the country.”
Mr Kingsley said there were two more immediate measures authorities should take to create a more sustainable property investment market.
“The government, APRA, ASIC, RBA and the state consumer affairs departments need to join forces and invest in a consumer education campaign to explain to Australian investors the truths about property investment. Only with a clear understanding of the market can investors make more informed decisions,” he said.
“Not every property makes a sound property investment and in this upswing cycle there will be many who will lose money. We need to teach Australians about this as well as encourage them to seek professional investment advice to limit this from happening.”
In addition to consumer awareness and education, Mr Kingsley said the current market conditions had reaffirmed the need for a comprehensive regulatory framework for property investment.
“I can guarantee you, once losses are experienced in the next few years, those consumers will want to blame someone and will look to blame the government for not protecting them – even if they made their investment decision themselves or bought via a property spruiker," he said.
“The government needs to be proactive and make progress on putting a minimum standard of education or qualification in place for those providing property investment advice, so we can be sure that Australian investors, who are looking for support to make well-informed investment decisions, can receive the same level of appropriate guidance provided to anyone investing in other assets, such as equities, to avoid a post-boom mess.”