APRA issues warning over mortgage lending standards

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Banks lending standards being stretched by competition
The competitiveness in the mortgage sector is stretching lending standards, according to Australia’s financial regulator. The Australian Prudential Regulation Authority has just completed a stress test on the on the banks focusing on a significant downturn in the housing market. New chairman Wayne Byres reported to a Senate committee that APRA may have to make some adjustments to ensure that lending falls within acceptable limits. Meanwhile, the Commonwealth Bank of Australia says that the government should use infrastructure projects to increase the supply of housing stock which would naturally correct the escalating house prices. The CBA believes that tackling unemployment is also key to maintaining a healthy housing market as people in work can afford to make home loan repayments.

RBA criticised for allowing risky lending to investors
The Reserve Bank of Australia has changed its tune on property investment and is now warning against something it previously championed. The Real Estate Institute of NSW says that the central bank has encouraged investment in property, which has benefitted the economy and the government, and is now issuing warnings about investing in the over-heating market. REINSW president Malcolm Gunning is calling for new loan-to-value ratios to curb investor activity.

Developer questions the over-supply of Brisbane apartments
Developer Kevin Miller is asking whether the high levels of construction planned over the next few years in Brisbane is actually needed. The CEO of Property Solutions wants to know where the population growth will come from to fill a record number of new apartments being planned for the city. Rents are falling already and without an inflow of new tenants that will continue or there will be properties standing empty. Miller predicts that more developers will hold onto property as long-term landlords rather than selling developments on.

Chinese investors account for a third of mortgages
The chairman of Yellow Brick Road says that a third of the mortgages written by his firm were issued to Chinese investors. Of the $1.1 billion home loans issued, $320 million were Chinese borrowers looking for better investments than their domestic market. That figure is double what it was a year ago. Although critics of outside investment say it is inflating prices, Bouris says it is good for the economy by creating jobs in the construction industry.

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