Some conflagrations are so predictable, such an inevitable part of the Australian landscape, that harm minimisation is our only defence – and the earlier we act, the better.
Such restrictions are not as exotic as they may sound. They were, indeed, deployed to great effect during our last property price boom in the mid-2010s.In 2014, the Australian Prudential Regulation Authority imposed a cap of 10 per cent on annual growth in new investor loans. In 2017, it also set a threshold for the proportion of lending that could be “interest only” – that is, not requiring repayments of principal.Then, in late 2018, these restraints were removed.
New Zealand’s central bank has done just that. Unlike our central bank, which is responsible only for setting interest rates , the Reserve Bank of New Zealand has dual responsibility for both setting rates and lending rules. As Auckland property values soared 18 per cent last year, the RBNZ decreed that, from this month, only 20 per cent of new loans can be written with deposits of less than 20 per cent of a property’s value.
Australia’s next property bonfire is well under way. And whose job is it to douse the flames? Put simply, and as things stand, the answer is: no one’s. Already, despite the biggest economic crisis since the 1930s, central banks are facing calls to “lean against the wind” by lifting interest rates earlier than strictly optimal for the broader economy, to head off risks of asset bubbles.
kevthelip We know who doesn’t hold the hose.
Nobody needs to 'douse' house prices. All we need is for governments to stop pushing them up with taxpayers' money through various tax deductions and grants. auspol
Of course, regulators have a job to do only in fanning the flames. Dousing is not one of their 'tools'.
APRA‘s conflicted. They don’t want house prices to drop and LVRs to rise as that will increase risk. Yet they have the power - via caps on certain kinds of loans or by adjusting the % minimum capital ratio - to suppress prices. APRA’s also close to industry, revolving doors.
Might be good in the short term but when you bury young people in huge amounts of debt they have less disposable income to inject into the economy fir the 30 years of the loan.
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