Home builders have given a positive reception to the move by the  Australian Prudential Regulation Authority to tighten the lending practices on interest-only and investor loans.
The boss of the regulator, APRA, Wayne Byres, has put the four big banks in notice to sharpen their lending in a bid to avoid any property bubble.
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Crackdown on investor loans
Treasurer Scott Morrison believes it's the willingness to loan money to investors coupled with watered down regulations that is negatively impacting household debt and housing prices. (Vision courtesy ABC News 24)
The chief executive residential communities at Stockland, Andrew Whitson, said Stockland sells about 75 per cent of its residential land and completed homes to owner occupiers.
 "Tightening prudential controls may dissuade some short-term property investors at the margin, however it should not impact investors who have the required equity and cash flow available to cover their long-term loan repayments," Mr Whitson said.
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 "We don't foresee the tightening prudential controls having any material impact on our sales volumes.Â
 "We support APRA's goals of promoting financial stability and ensuring that mortgage lending standards are maintained."
Mirvac, which is one of the largest apartment builders in the country, run by Susan Lloyd-Hurwitz, says the group "welcomes the announcement as a positive step forward".
"Strong lending practices are good for the community. They help deliver greater economic resilience," Mirvac spokesperson said.
Craig James, chief economist at CommSec said the measures announced by APRA are designed to keep modest pressure on the brakes of investor home lending rather than represent a slamming on the brakes.
"Annual growth of investor lending still remains comfortably below the 10 per cent annual growth limit although new lending has been lifting in recent months. Anecdotally the lift in interest rates on investor housing loans is already acting to slow interest in home buying," Mr James said.
However, CoreLogic, the property analytical group, called the APRA move a "band aid" that won't work.
CoreLogic reported this week that Sydney house prices are up 19 per cent over the past 12 months, and this is clearly not the news that the government, nor most of our population wanted.
The group's analysts, Carl Heath and Marshall Cobb, said while it is nice to watch your own home continue to increase in value, above average growth also brings with it a sense of anxiety as to whether or not the market will fall, and if so, by how much. Â
"So with the RBA reluctant to lift rates to cool the market, the government quietly turned to the Australian Prudential Regulatory Authority [APRA]Â for some leadership," they said.
"With a wink and a nod from APRA [and clearly against the RBA's advice]Â most banks increased their interest rates over the last 10 days. In any other industry, such an obvious level of collusion would trigger a Royal Commission. And with that little job done, APRAÂ warned the banks to reduce the number of interest only loans that are being written, as they feel that they boost the credit available to property investors and is part of the property price problem.
"I believe that the attempts to influence the market by policy are a band-aid and will not work. In fact, I think that squeezing the credit supply may have the opposite effect, as it will slow down the rate of sale and the knock-on effect is that the developers will build less, and restricted supply will only lead to more price growth, economics 101.
The CoreLogic team added that government can play with interest rates, stamp duty, first home buyer concessions and the foreign buyers stamp duties, BUT, none of these will have the same effect as simply increasing the supply of stock and letting the free market do its thing.
Master Builders said it welcomes the Australian Prudential Regulation Authority (APRA) announcement of measures to address the growth in low deposit and interest only finance for residential property investors.Â
Welcome move
The chief executive of Masters Builders Australia, Denita Wawn, said APRA's measures are a responsible approach to tackling the risk of interest only lending while supporting "continuing sustainable growth in investor activity in the housing market".
The Property Council of Australia said APRA has a "vital role in ensuring that the financial system is resilient enough to withstand external shocks".
"It is a role we fully support,"Â said Ken Morrison, chief executive of the Property Council of Australia.
"We hold the view that in the long-run, boom and busts benefit no-one, so it is best to be prudent without being unnecessarily risk-adverse.
"Having a balanced approach is in everyone's interests.
"However, we do note that housing approvals have fallen by 17 per cent from their peak over the past eight months, so we are not seeing a glut of supply. In fact, we are seeing consistent strong demand in our largest cities."
Mr Morrison said in states coming off the economic peak of the mining boom, there is evidence of an orderly readjustment in prices and rents.
"We have been supportive of previous measures undertaken by APRA in the past and understand their motivation. We will take a 'watch and see' approach to these changes and remain in dialogue with regulators on any unintended consequences," Mr Morrison said.
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