The Top 20 locations most impacted by lending curbs
Lending curbs looming
A further lending clampdown seems increasingly likely for the housing market, and Pete Wargent, the co-founder of Australia's first national property buyer's agency network BuyersBuyers, says that house prices in locations in Sydney and Melbourne could be the most impacted in the immediate term.
Mr Wargent said, "APRA has already announced changes to serviceability buffers, and there may be caps on debt-to-income ratios to follow over the next year. The rules are likely to reduce the borrowing capacity of homebuyers, and the most impacted property types will be family homes in areas where price to income ratios have already become stretched, especially beyond the $1 million to $1.2 million plus price range, where many dual income households will cap out".
"In the price brackets under $1 million, we should expect to see less impact on the market. Buyers are likely to remain active but may need to adjust their budget and expectations slightly if these changes are pushed through. Further cooling measures could include restrictions to borrowers at more than six times income, in addition to floor assessment rate changes."
"Some borrowers might still move to non-bank lenders, offsetting the restrictions to some degree, but we still think the higher end of the market will be impacted most in 2022, while units look like good value in Sydney and Melbourne now, relatively speaking" Mr Wargent said.
The top 20 impacted locations
Doron Peleg the founder of RiskWise Property Research, said that locations in Greater Sydney and Greater Melbourne where house price to income ratios are already well above six times could be impacted in 2022, if debt to income caps are introduced next year.
Mr Peleg said, "our analysis highlights twenty locations where the median house price to household income ratios are at around nine times or above. In these locations, a reduction in borrowing capacity of potentially up to 15 per cent would have a noticeable impact of market dynamics".
"These changes would not be as dramatic as those experienced through the macroprudential measures of 2017 but would have a temporary cooling effect on highly leveraged sectors of the housing market in Sydney and Melbourne".
Figure 1 – Top 20 SA4 regions impacted by lending curbs
Mr Peleg said, "incomes are high in Canberra, so that market might be less impacted, while much of the money driving the market in Queensland is coming from the southern capital cities."
"We believe property investors will remain active overall, simply because rental prices have been rising, and the cost of borrowing has moved considerably lower, making for an attractive cashflow outcome. But the top end of the market, dominated by owner-occupiers, will likely see some cooling" Mr Peleg said.
Mr Wargent of BuyersBuyers said that there had been some pull-forward of enquiries and demand as property buyers look to lock in mortgage pre-approvals before the impact of lending curbs.
Mr Wargent said, "there is a sense of looking to get moving before lending curbs impact borrowers, especially now that one-to-one inspections have become a possibility in Melbourne again."
"Over the long-term, changes to lending rules are unlikely to have much impact on housing prices, but in the short term, they will likely change the shape of the lending market. I'd expect to see far fewer first homebuyers active in 2022, with the stimulus measures wearing off and borrowing power for single income earners being reduced. But investors will be active, especially up the $1 million price range" Mr Wargent said.
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