Banking Regulator Tightens Scrutiny of Property Investors Amid Market Concerns
Australia’s banking regulator, the Australian Prudential Regulation Authority (APRA), is increasing its focus on property investors as concerns mount over a rapidly expanding property market and potential economic headwinds. Despite the banking system weathering a period of high inflation, a cost-of-living crisis, and significant interest rate hikes with remarkably low default rates – currently just over 1.1 per cent and trending downwards following recent rate cuts - APRA is acting to mitigate future risks.
The move comes as investor loans have seen sudden growth alongside a surging property market, coinciding with a potentially weakening economy. APRA’s concern centers on the possibility that robust labor markets, which have kept unemployment low despite rising interest rates, may not remain consistently strong.
This increased scrutiny reflects a shift in the political landscape surrounding housing affordability. What was once a non-issue for political leaders – as former prime minister John Howard famously noted, he never received complaints about rising house prices – has become a major source of political division and social unrest. Home prices have risen almost 50 per cent in the past five years, reaching record levels of unaffordability, according to recent reports.