Need for housing intervention questioned as lending cools

According to the Australian Bureau of Statistics (ABS), new housing loan commitments dropped 1.5 per cent in June, with investor lending said to have considerably tightened. Namely, with growth of only 0.7 per cent in June, following a rise of 13.3 per cent in the previous months, investors appear to be hitting the breaks.

This, combined with an impending recession on the back of Sydney’s prolonged COVID lockdown, could be enough to convince the regulators to wait a little longer.

REA’s research analyst, Cameron Kusher, believes the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) should resist calls for macro-prudential intervention for the time being.

Mr Kusher explained that with Greater Sydney and now Brisbane in lockdown, a slowing of price growth will likely be the flow-on effect.

Additionally, he said, there is already an indication some of the heat has come out of the market.

Looking ahead, Mr Kusher pointed to several factors that will continue to slow record growth.

“With COVID-19 vaccines now being rolled out and the hope of lockdowns ending as vaccination rates increase with a view to reopening the international border next year, this return to a more normal and functioning economy should lead to less demand and money pouring into housing and more funds being pumped into things like domestic and overseas travel,” Mr Kusher said.

In announcing its August rate decision, the RBA said on Tuesday that the bank is “monitoring trends in housing borrowing carefully and it is important that lending standards are maintained”.

Mr Kusher applauded this announcement, noting that the RBA and APRA should continue to closely monitor lending standards. However, he believes “it would be a mistake” to introduce macro-prudential policies too soon as this could lead to a slowdown in the domestic economy’s performance.

And with a slowdown in the economy’s performance already on the cards in the September quarter, the pendulum of public discourse appears to have swung in the opposite direction – away from the need of market intervention.