Regulators are scrambling to curb investor speculation, as it is driving up prices in Australia’s housing markets. Deutsche Bank, CoreLogic, and economists at the Commonwealth Bank of Australia (CBA) agree that soaring house prices and ravenous investor loan demand have outpaced lending to owner-occupiers.

The debate over housing affordability has intensified over recent months, especially in Sydney and Melbourne, where house prices have risen virtually non-stop for nearly five years. This has pushed up household debt to unprecedented levels, adding to regulatory concerns and creating pressure for governments to pass reforms.

Growth in investor loans has outpaced owner-occupier lending for five consecutive months, according to data from Deutsche Bank and the Australian Prudential Regulation Authority (APRA).  “Should this trend continue, this may result in a regulatory response,” said Deutsche Bank analysts Andrew Triggs and Anthony Hoo.  

Home loans to landlord-investors increased 0.6% in January from the previous month, compared with a 0.5% increase for owner-occupiers, according to the Reserve Bank. Moreover, investor home loan approvals were up 23% in the December quarter; in contrast, owner-occupier approvals were down 9%, according to APRA.

APRA stepped in during the height of the last investor-led frenzy in late 2014, urging banks to curb annual growth in home loans to landlords. This directive, which remains in place, slowed the pace of such loans in 2015 and for a part of 2016.

Australia’s biggest banks may have already started ramping up investor mortgage rates.

Last month, RBA Governor Phillip Lowe conceded that fear of inflating housing bubbles in Sydney, Melbourne, and Brisbane stopped the Reserve Bank from cutting interest rates to boost the economy. The Reserve Bank reduced rates twice last year, in August and October.

“Trends in employment, inflation, national income and the Australian dollar, in our view, lean towards a prolonged period of unchanged monetary policy settings,” said Michael Workman, senior economist at CBA. “But the housing prices and lending trends may be seen as justifying some more tweaks to lending guidelines.”