Tremors have recently been felt in Australia’s housing market as Macquarie Bank cut its maximum loan-to-valuation ratio (LVR) from 80 per cent to 70 per cent for around 50 postcodes and 100 suburbs. Most of these are inner-city areas where apartment constructions are set to create a large oversupply soon.

This means that the bank is prepared to lend less money for housing investment. Macquarie’s move serves as an implicit warning that these inner-city areas could see property prices falling by more than 30 per cent in the near future.

However, this is not to say that the entire housing market will soon crash. In fact, Westpac—the biggest lender to property investors in Australia—is moving the other way, as it increased its LVR for property investors from 80 per cent to 90 per cent.

The bank is trying to catch up with its competitors after seeing a fall in investor lending when it decreased its 95 per cent LVR to a safer 80 per cent in July last year. Its current LVR, which allows investors to buy properties with a deposit of 10 per cent instead of 20 per cent, could help boost investor lending growth rates in the short term.

Still, owner-occupier growth is likely to remain weak due to constrained wages growth and population growth, both of which are at multi-year lows. Furthermore, property prices weakness will get a lot worse as the apartment glut occurs and banks will try to grow their mortgage books elsewhere.