Aussie regulators could soon follow their New Zealand counterparts and introduce tough new restrictions on new owner-occupier home loans.
This is the view of broker Morgan Stanley who has been predicting a new round of macro-prudential measures in Australia since the beginning of the year.
While housing loan growth has not reached the same levels as it has in New Zealand, Australia’s central bank governor, Philip Lowe, stated in July that “if we saw a large and sustained gap in household credit growth relative to income growth then we would be looking at various policy responses”.
“This is playing out, and we believe that new macro-prudential measures are likely to be introduced,” Morgan Stanley said in a client note.
“Like New Zealand, the build-up of debt in Australia is being driven by owner-occupiers rather than investors. “This means that 2021 measures will need to be different from the 2017 measures, and could be similar to New Zealand.”
Last week, the Reserve Bank of New Zealand announced its intention to tighten the current loan-to-value ratio (LVR) settings on 1 October on lending to owner-occupiers given "a significant increase in higher risk loans".
The central bank said its preferred option would further reduce the amount of 80 percent LVR lending to 10 percent of all new owner-occupier loans from 20 percent currently.
It is also considering restrictions on high debt-to-income (DTI) lending.
“In Australia, we believe that the Council of Financial Regulators' quarterly statement this month will provide an important signal for the timing and or triggers of potential measures,” the broker said.
During 2021, the proportion of new investor lending in New Zealand fell below its historical average, with the fall especially pronounced for high-LVR investor lending.
However, the RBNZ notes that there has been “a significant increase in higher risk loans to owner-occupiers”, with 80 percent LVR lending nearly tripling since 2017.
New Zealand housing loans account for 9 percent of the major banks’ total loans, and system growth has accelerated from 8 percent in 2020 to 12 percent this year.
The majors' annualised growth rate averaged 13 percent in the 2021 first half but Morgan Stanley forecasts it to slow to between 6 t over the next few months and to four percent in 2022.