APRA lending rule changes haven't stopped market momentum

Recent changes to bank lending practices introduced by the Australian Prudential Regulation Authority to scale back borrowing levels have had only a modest impact on the market.

Under the rules introduced late last year, lenders must now apply a 3% buffer – up from 2.5% — to ensure clients can handle future interest rate increases. So, what's going on?

The move was designed to dampen property prices without taking out the sledgehammer of interest rate rises, which would hit the entire economy.

But it's had only a modest effect on property prices because the market's momentum was too strong. Not only is the supply of homes for sale below five-year average levels, but the time each property stays on the market is still remarkably short.

APRA put everyone on notice that it thinks the market is too hot. Its action was a soft warning that buyers should not extend themselves fully to make a purchase and watch your debt-to-income ratio to ensure it is not too high. It is also a signal of the expectation of interest rates rising later this year. 

With talk of inflation and wages growth also on the cards, and an election expected very shortly, there is no doubt that the economic picture is likely to change. 

But at the moment, property markets continue to perform strongly. 

If you are preparing to sell your home and believe we can assist, please do not hesitate to contact us.  We'd be delighted to conduct a market appraisal to help you understand how much your home is worth in the current market, and discuss the price trends and marketing initiatives to deliver an outstanding sales result.