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Regulators may ease home lending restrictions if property prices fall sharper than expected, reported The Australian Financial Review based on its interview with federal treasurer Scott Morrison.
Morrison said the government was closely monitoring the slowing housing market and that stricter house lending rules imposed on banks over the past year were "completely malleable".
Tougher lending conditions have been blamed for the declining housing prices, particularly in Sydney.
Sydney’s property prices have fallen for a fifth straight month with a 0.9% decline over January, data from CoreLogic shows. The city’s median house price remains lower than it was six months ago, with annual growth slowing to 4.0% year-on-year, according to the December Quarter Domain House Price Report. At the national level, property prices fell 0.3% in January, with annual growth slowing to 3.2%, from 4.3% in December.
Economists have lowered their forecasts for house price growth this year amid slowing Sydney house values, with NAB now expecting house prices to increase by only 0.7% in 2018 -- down from its earlier forecast of 3.4%.
Morrison said he was meeting regularly with APRA to discuss the Council of Financial Regulators’ process, reported the AFR. The council is the coordinating body for main financial regulators and is the guiding body informing APRA's lending rules for banks.
The prudential regulator’s moves to restrict lending to investors and to cap interest only loans had been "very effective" in achieving a "soft landing", said Morrison.
However, he signalled APRA’s measures were open to revision depending on market conditions, said the report.
Last year, APRA capped the amount of new loans that can be interest-only at 30% after limiting the growth of investment lending up to 10% per year in 2014. It also called on banks to make sure serviceability metrics are set at appropriate levels and to continue to limit lending growth in high-risk segments, including high loan-to-income loans and high LVR loans.
"The great thing about these macroprudential controls, as opposed to a structural change to your tax system, is that they are completely malleable," he said.
Morrison welcomed Sydney house price growth slowing from a high of 17% annually to about 3% in 2017, said the report.
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