No Investor Credit Bubble in Australia Housing, Morrison Says

  • Sydney and Melbourne prices may be high, ‘but they’re real’
  • Treasurer comments as CBA tightens investor lending criteria

Australian Treasurer Scott Morrison said he doesn’t see excessive speculative borrowing by property investors even as the nation’s largest bank tightened its lending criteria.

“Our prices may be high, particularly in Sydney and Melbourne, but they’re real,” Morrison told Bloomberg Television in an interview in Sydney Monday. “The issue in housing affordability and housing prices in Australia is the mismatch between supply and demand. It’s not the function of any sort of investor credit bubble. They’re real prices. They’re real values.”

Morrison discusses Australia’s property market

(Source: Bloomberg)

Hours before Morrison spoke, Commonwealth Bank of Australia further tightened its investor lending criteria as it strives to stay within the Australian Prudential Regulation Authority’s 10 percent cap on annual investor mortgage loan growth. The bank will now only accept applications for such mortgages with a maximum loan to value ratio of 90 percent. It’s also recently raised interest rates and curbed refinancing with borrowers from other institutions.

The rapid price growth on Australia’s east coast at a time of anemic wage increases has made housing affordability a hot-button political issue. Concerns are deepening among politicians and regulators about the foundations of Australia’s housing market. Data released March 1 showed Sydney property prices surged 18.4 percent in the year through February, the fastest annual pace in 14 years.

Watchdog Warning

Australia’s securities regulator said this month it is looking at mortgage lending standards across the banking industry after taking civil court proceedings against Westpac Banking Corp. over alleged failures to properly assess whether borrowers could afford their mortgages.

Morrison said he met last week with regulators including the Reserve Bank of Australia, the Australian Securities and Investments Commission, APRA and Treasury officials who he said are “very closely” monitoring housing and lending.

Prices in Sydney and Melbourne have been fueled by record-low interest rates, increased demand from overseas buyers and tax breaks for property investors. The Organization for Economic Co-operation and Development said earlier this month the biggest threat to Australia’s economy is a hard landing in the property market.

“What we’re working as a government to do is to put downward pressure on those rising prices by addressing the supply challenges that are out there and working with state governments to achieve that,” Morrison said, adding new measures will be set out in the May budget. It will involve steps “right across the housing affordability spectrum,” he said.

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