Login
APRA’s cap may not impact prices, but could limit investor strategies, experts say
While APRA’s new high debt-to-income lending 'won't rock the market', experts warned it could cramp investors’ borrowing power and tighten an already stretched rental market, especially in Queensland.
Last week, the Australian Prudential Regulation Authority (APRA) unveiled new debt-to-income (DTI) limits aimed at curbing potential housing-related risks before they escalate in the financial system.
From 1 February 2026, banks will cap home loans exceeding six times income at 20 per cent of new lending, with exemptions for new home purchases, construction, and bridging finance.
While the measure aimed to shield the financial system from the rise in highly leveraged borrowers, property experts have cautioned that it could unintentionally squeeze investors and reduce rental supply.
According to Cotality’s research director, Tim Lawless, APRA’s move was widely signalled and unsurprising, given recent reports highlighting housing and household debt risks, rapid growth in investment credit, and potential market volatility.
“Given all that as the background, this actually doesn't surprise me. Maybe what is surprising is this does seem to be a very light touch,” Lawless told REB.
Despite concerns about the new lending cap, Lawless said it would have a limited impact on the housing market as only a small portion of loans currently exceed the threshold.
He noted that the rate of growth remained steady, with housing values still rising nationally by more than 1 per cent in November, particularly in markets with high investor activity like Perth, Brisbane, and Darwin.
“I don't think this is going to have a material impact on slowing down price growth, but it does send a message to the market, given the fact that ARA has been quite clear, they could introduce additional measures further to curb the level of investment in the marketplace.”
According to Lawless, while the new lending cap won’t impact market prices much, it could dampen investors' activity.
“If APRA introduced tighter credit conditions more firmly aimed at investors, that would have a much more dampening effect on the market.”
“But for the time being, it doesn't look like APRA is going to be going down that path, but there's truly left the door open.”
Similarly, mortgage broker at Finni Mortgages, Eva Loisance, told REB that while the new rule may be alarming, it won’t put a lot of pressure on the market.
She said that APRA data showed around 10 per cent of new investor loans and 4 per cent of owner-occupier loans exceeded the six-times-income threshold, but most banks remained below 20 per cent, limiting immediate disruption.
“It may affect investors who have 2-3 or more investments when their servicing gets tight anyway, and cool down the high leverage investing strategy some investors use,” Loisance told REB.
“It feels ironic to see this rule while the government is simultaneously expanding access to highly leveraged loans for first home buyers.”
“It’s a classic case of regulators and policymakers working at cross-purposes: stabilising the system vs. boosting access to home ownership.”
Domain said that APRA’s new 20 per cent cap on high debt-to-income loans was a measured, pre-emptive step to manage systemic risk rather than a brake on property prices.
Domain’s chief of research and economics, Dr Nicola Powell, said the cap serves as a pre-emptive guardrail to manage rising high-risk lending, while not immediately restricting credit or borrowing for most buyers, including first-home buyers.
“While the limit could start to influence investor behaviour down the track if high-DTI volumes surge, for now, it’s a policy that strengthens the system’s resilience without punishing households or dampening the essential need for new supply.”
The Real Estate Institute of Queensland (REIQ) has warned that the new lending cap could disproportionately affect property investors and worsen Queensland’s rental shortage.
REIQ CEO Antonia Mercorella said that while most banks currently operate below the threshold, with the immediate impact on credit to be minor, high-DTI lending remains concentrated among investors, who hold a large share of new home loans in the state.
“While on the surface this change appears modest, the risk lies in gradually squeezing investors out of the market at a time when Queensland desperately needs more rental supply.”
Mercorella said Queensland’s housing dynamics made it particularly sensitive to measures that disincentivise investors.
She said Queensland’s housing market has been especially vulnerable to policies that deter investors, given its above-average renter population and investors accounting for roughly two in five new home loans.
The peak body called on APRA to carefully monitor the measure to ensure it supports rental supply and does not undermine the state’s housing stability.
“In simple terms, fewer investors means fewer rental properties, which ultimately pushes rents even higher for tenants already under pressure.”
“Investors are not the enemy in the housing affordability debate, but a critical part of the solution. In a state like Queensland that relies so heavily on private investors to provide rental homes, policy settings must support and not stifle their participation,” she concluded.
