How will APRA’s sledgehammer impact our housing markets? | Property Insiders [Video]


There’s now a light at the end of the tunnel and that’s great for our wellbeing, our lives, and our property markets.

With Covid related restrictions slowly being lifted in Sydney and Melbourne, life is getting back to a more Covid normal, and the pent-up demand from the last couple of months should ensure our property markets continue to perform strongly moving forward.

Only last week, Westpac upgraded its forecast for Australian dwelling prices again. Apra3

They are now expecting property prices to rise 22% for the full calendar year 2021 (up from its previous forecast of 18%) and they have also lifted their outlook for next year from 5% to 8%.

But how is APRA’s intervention going to interfere with this?

That’s a question Dr. Andrew Wilson and I have discussed in these weekly Property Insider videos over the last couple of weeks, and today I’m keen for him to share his thoughts on affordability and how this differs in the various states today.

We’ll also discuss the latest employment figures, home-building statistics, and auction results.

APRA sledgehammer impacts all housing markets — regardless

APRA – the financial regulator for the big banks – has introduced a policy initiative designed to reduce perceived emerging risky lending.

The latest action by APRA is designed to restrict perceived risky home lending is a blunt, one-size-fits-all approach that does not account for the clear affordability disparities of local housing market conditions.

And clearly reflects the market power wielded through the big banks.

Watch this week’s Property Insider video and you’ll hear Dr. Andrew Wilson and me discuss:

  • How APRA is concerned that, because of our recent strong housing market activity, home loan sizes are increasing faster than incomes, potentially increasing the debt load for new borrowers. They feel this could become an issue for banks if official interest rates rise – although the RBA has consistently stipulated that this is unlikely to happen until at least 2024.
  • How the tightening of lending conditions will impact all new borrowers regardless of the “risk” circumstances of local housing markets.
  • The smaller states are disproportionately affected by APRA’s one size fits all sledgehammer approach
  • Why it’s likely there will be further macroprudential controls introduced.
  • How affordability differs from State to State

Affordability 1

Affordability 2

281,000 Australians lose their jobs because of Delta

Hundreds of thousands of people have either lost work or dropped out of the jobs market since July, wiping out Australia’s initial COVID-19 recovery. Australia Property

Australian Bureau of Statistics data shows Delta lockdowns have driven employment back below pre-COVID levels, with 110,000 fewer jobs being worked in September than in March 2020.

About 281,000 people have lost work since July, while about 330,000 workers have left the labour market – triggering a jobs recession.

But the worst may soon be behind us. The monthly job report is a lagging indicator – it can reflect decisions made months ago in terms of hiring or firing.

Rather than looking at job shortages, timelier figures show that job vacancies are rising – in some cases soaring.

Finding workers to fill all the job vacancies could be a challenge.

Watch this week’s Property Insider video as Dr. Andrew Wilson explains why.

Unemployment Nab

Participation Rate

Job ads rose by 6.0% in September as NSW prepares to reopen

SEEK job ads rose strongly in September as firms in NSW prepare for opening on October 11

Hospitality & Tourism and Retail saw the largest month-on-month rises of 28.5% and 20.6% respectively.

The trend decline in unemployment in place prior to lockdowns should re-establish itself quickly

Activity in the home building sector is buoyant

Commencements rose by 23.2% in the June quarter – the biggest quarterly rise in 20 years – 64,596 new starts

This means homebuilding activity will be strong for at least the next 6 to 9 months and there is the question of rising costs in the availability of materials.

It’s worth noting that the number of dwellings under construction ( 211,686), while at a 2 year high, is still short of the all-time high of 231,504 set in the March quarter of 2018.

However, the number of houses being built ( 88,446) is a record.

Dwelling Being Built

This week’s auction results – another weekend of strong auction results

The first month of the spring weekend auction market is concluded with more remarkable results despite the burden of ongoing Covid restrictions in most capital cities.

Watch this week’s Property Insider video as we discuss how most Capitals continue to record generally strong results for sellers.

Sydney Auction Market

Hot Sydney market lowered again at the weekend.

Sydney’s weekend auction market was lower again although boom-time results prevail, and are unlikely to change over the coming weekends as the continuing city continues its post lockdown reopening.

Sydney recorded the preliminary auction clearance rate of 83.6% which was lower than the previous weekend’s 86.6% but remained higher than the 78.6% recorded over the same weekend last year.

Sydney’s clearance rate fell for the second consecutive weekend to be below 85% for the first time in six weeks, although it remained above 80% for the 13th consecutive weekend.

Higher auction numbers may be contributing to an easing in Sydney’s clearance rate over recent weekends.

The following chart from Dr. Andrew Wilson shows the Sydney auction clearance trend:

Sydney Clearance Trends

Melbourne Auction Market.

Melbourne auction market keeps rising.

The Melbourne auction market continues to revitalise on the back of the recent easing of Covid restrictions.

Melbourne recorded a clearance rate of 77% on Saturday which was similar to the previous weekend 76.6% and well ahead of the 63% recorded over the same weekend last year

The following chart from Dr. Andrew Wilson shows the Melbourne auction clearance trend:

Melbourne Clearance Trends

READ MORE: Here’s how APRA caps could impact how much you could borrow


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'How will APRA’s sledgehammer impact our housing markets? | Property Insiders [Video]' have 28 comments

    Avatar for Michael Yardney

    October 6, 2021 Karen

    Mortgage insurance concerns me as it doesn’t only cover the banks and the borrower still has to pay the loan back? I see my kids now as very vulnerable!


      October 6, 2021 Michael Yardney

      You are right, the banks are covered by mortgage insurance and the borrower is responsible for their debts.
      Having said that people should develop good money management skills and not borrow more than they can afford to repay.
      It’s unlikely the interest rates will go up for a while and hopefully your kids will not be vulnerable


    Avatar for Michael Yardney

    September 29, 2021 Karon Cumner

    In all this covid mess its been reassuring that the property market has done well. People who own property make sacrifices to get into the market. I appreciate this blog for good solid information thank you.


      September 29, 2021 Michael Yardney

      Thanks Karon – you’re right become financially free doesn’t just happen – you need to work for it and make sacrifices


    Avatar for Michael Yardney

    September 15, 2021 Errol

    Are we still this optimistic about Australia and its future ?
    Australia has changed a lot since this blog post was submitted.
    Under “normal” circumstances, I would say “yes, Australia will bounce hardly”
    But we most likely won’t be under “normal” circumstances for the mid to possibly very long term anymore.
    I come from a communist country, and I lived the transitional period from full democracy to becoming a tyrannical regime.
    There are many strategical similarities to what’s happening in Australia, but with different colors.
    If we keep this path, we won’t be ok, things will change forever
    “Profits” from real estate will become irrelevant when there are no freedoms.
    Even if you get “vaccinated”


      September 15, 2021 Michael Yardney

      This blog is updated every week Errol – and yes, we’re still optimistic


    Avatar for Michael Yardney

    June 2, 2021 Mike Schwarz

    Dr Andrew Wilson – Question on Interest Rates
    It is said that the banks have been receiving cheap funding from the reserve and this ends in June. They will then need to source funding on the global market which is markedly higher. This would suggest they will have no option but to raise interest rates.
    Had you factored this into your view on interest rates?


      June 2, 2021 Michael Yardney

      Great question Mike. I know Dr Wilson has taken this into account from our private discussions. The banks will have to borrow overseas, but look what interest rates are overseas. Of course the value of the Australian dollar will be a factor.
      Remember, the RBA is keen to keep interest rates low to stimulate the economy, increase business activity and jobs growth and eventually get unemployment down. They are not not going to pull the rug out from under us


    Avatar for Michael Yardney

    April 25, 2021 Mark

    Its interesting to watch the FOMO effect on purchasing real estate at higher prices than they are worth as real estates are elevating prices during the demand. I also recently read an account of a person at auction in Sydney saying I felt like I had won lotto just because he secured the winning bid !
    Now the prices are rising so quickly and people are borrowing way to much to purchase at historically low interest rates its not difficult to work out what happens next when interest rates rise again !
    See household debt in Australia
    Another concern is the misdemeanor of good debt and bad debt lets face it all debt is bad but it portrays a certain air of its ok because its good debt .. but good debt can turn bad too ie negative equity
    We see the occurrence every decade or so the debt delinquency increases this last happened when interest rates were increased
    I have been in a position where I have not only seen this occur but almost been burnt too .. not a good feeling but you learn by your mistakes very quickly
    The oracle Buffet says be fearful when others are greedy and greedy when others are fearful
    I am standing back and waiting for this supposed pandemic mayhem to cease ….


      April 25, 2021 Michael Yardney

      What you say is correct – some people are making poor decisions driven my FOMO – but that doesn’t mean it’s the wrong time to make a wise investment decision


      Avatar for Michael Yardney

      August 18, 2021 Bruce Mitchell

      Hi Michael,
      I don’t feel the question was answered, what’s GOING TO happen, up, down, you hint it’s not, but I agree with one of your comments above.
      Interest rates are going higher, people have overspent and it’s gonna crash soon.
      I’ve been wrong till now and hope I continue to be,
      Tho it’s a time bomb waiting g and it’s gonna be bad but with opportunities opened.
      You and all real estate keep talking it up, that’s your job, I just don’t agree.


        August 18, 2021 Michael Yardney

        Bruce, with so many unknowns what’s going to happen in the short-term is very hard to forecast, but I tend to avoid forecasts and have expectations instead.

        I expect we will have some difficult times and some good times, but I don’t know when they will occur.

        I expect we will learn to live with the coronavirus, but I don’t know how long it will take, and I expect the underlying fundamentals will keep driving up our property markets, not because I’m in eternal optimist it because I’m a realist and I don’t fight the big trends.


    Avatar for Michael Yardney

    April 2, 2021 Mary

    Your comment about “Australia heading towards Japan” and being over 1T in debt

    Have you seen this link lately?

    Australia is doing AMAZINGLY WELL compared to the rest of the world.

    I suggest to try removing the lens of pessimism and looking at life in general with a more realistic and optimistic outlook

    People are angry when prices go down
    People are angry when prices go up

    Can’t seem to win either way eh?


    Avatar for Michael Yardney

    March 3, 2021 Jennifer

    90% of jobs recovered? I I don t think so. The tourism and travel sectors have been decimated and the education sector is not far behind. It s a shame that 9-5ers forget that these sectors even exist. I personally have been getting by on menial casual jobs for over a year and it looks like that will continue for most of this year as borders remain closed. Some of us have had our lives turned upside down for the foreseeable future, so No, it is not back to normal. I m lucky as I had some money and a mortgage already but I can t even go to the bank to access a better rate through refinancing as I don t tick a single box right now. And I work for a very reputable company normally – stood down definitely through no fault of theirs or mine. Not all of us are back to normal!


      March 3, 2021 Michael Yardney

      We quoted the Australian Bureau of Statistics latest figures. Of course for the many people like you who are still without a permanent job and the situation is terrible and we are not wanting to belittle that.


    Avatar for Michael Yardney

    February 4, 2021 Raj Thakrar

    Hi Michael,
    It is too early to be generalist and say property prices will hike. There are number of factors in play here.
    1 Due to lock down some sales were on hold
    2 Government Incentive in play
    3 Relaxed lending rule
    4 Government incentive
    Cost of new build artificially inflated by builders and developers sending cost of new build to new level making house price higher. The buyers technically are not benefiting for these Government incentives they are going in to builder and developers pocket. Housing in Australia is still young growing market so bubble will burst scenario does to stack up. It is always demand and supply simple economics.


    Avatar for Michael Yardney

    December 10, 2020 Philip Lee

    The property market didn’t collapse because the government is throwing everything at it to keep it afloat. Our property market is not a free market driven by market fundamentals. It is manipulated by the government cutting interest rates to zeo, stamp duty concessions plus first home buyer grants, and government guarantees for deposits all sucking in the financially unsophisticated into putting themselves into a life of mortgage stress. It’s just kicking the can down the road.


      December 10, 2020 Michael Yardney

      Philip. You are correct, our property markets have never been a “free market”, they have been manipulated by the Reserve Bank and APRA. Remember a couple of years ago when investors were dominating the market pushing up prices, the RBA raised interest rates and APRA made it much harder for banks to lend to investors and this slowed down the markets.
      Currently intervention has supported our markets and that’s good. It’s the government’s job to protect its constituents – you and me and one way of doing that is providing stability to our housing market. They are too big to fail and no one will let them fail.


    Avatar for Michael Yardney

    October 16, 2020 Joseph Battaglia

    Michael your optimistic views irrespective of the true underlying data is disconcerting.
    The government is covering up the reality of the situation, throwing money against the wall at all costs (hoping some will stick) and falsely propping up the economy whilst kicking the can down the road. The rhetoric from parties with bias/interest in the real estate market are also contributing to the propaganda that “things are ok and sentiment is up” – whilst reality is different.
    We are not leaders on the world stage, for our real property obsession, in fact we are almost ridiculed that we are a nation that increases their wealth through selling properties to each other increasing the price at each transaction.

    Its fiscally clear, we should allow the reset button to deflate this overvalued bubble and get back to reality. I mean seriously, some of these prices are ridiculous!

    Are we going the way of Japan?
    This QE is just irresponsible on all counts.
    Over $1T in debt for such a small economy… come on, who are we kidding.


      October 16, 2020 Michael Yardney

      You are right Joseph, many of our industries are on life support from the government at the moment. And while the property market was being supported by loan deferrals, they seem to be cleaning themselves up nicely. What is the alternative? Do you really want to see businesses go broke and people go hungry? Our government and those around the world have learned how to handle economic downturns. And spending our way out of a downturn is a valid economic argument


    Avatar for Michael Yardney

    October 2, 2020 Dave

    Dear Michael. Your articles are interesting
    and usually very well written . However this one is full of a lot of spelling and sentence construction mistakes that in parts make it hard
    to follow . Take a look at where it says sh-t (Let me know if you need a proof reader ) 😉


      October 2, 2020 Michael Yardney

      Thanks for the heads up Dave – you are right lots of errors in this one. As I can talk faster than I can type I usually use voice to text, and it is pretty accurate. But clearly I missed a couple of bad bloopers this time.


    Avatar for Michael Yardney

    July 24, 2020 Martin

    The RBA will print money. And has printed plenty of it already to fight covid-19. It just doesn’t give the money directly to the government. It prints new money and uses it to buy government bonds on the secondary market so that institutions can take a cut as they buy the newly issued bonds from the government So that the government can pay for jobkeeper and Then these institutions onsell them to the RBA for a markup.


      July 25, 2020 Michael Yardney

      There has been a lot of discussion recently about Modern Monetary Theory, which suggests central banks should print more money and then give (lend) it to the government, to help pay for it debts.
      This week RBA governor Philip Lowe said that he won’t do that (print extra money) instead the banks should borrow on the open market at the prevailing low interest rates because they can afford it.
      Rather than print more money he gave the Morrison government the green light to increase debt levels and lock in a larger budget deficit to support the economy during its recovery from the virus crisis


    Avatar for Michael Yardney

    June 26, 2020 Alex P.

    While Dr Wilson may say that more sellers entering the market is an expression of confidence, the flip side is that it may be the smart money taking the opportunity to exit while prices are still holding up. If you drill down in the data is there a way to differentiate whether these are investment properties or owner occupied properties being sold and how does that relate to historical data. Second point is that government intervention has done a good job of addressing short term liquidity over the crisis but there have been no measures on a similar scale to address solvency, and solvency is what really matters after the liquidity tap has been turned off.


      June 26, 2020 Michael Yardney

      Alex, you are right on both counts.

      Our experience on the ground speaking to buyers, sellers and estate agents, is that there are very few distressed properties coming on the market at present.

      Similarly we do not believe the government is going to pull the rug out from under us in September after he’s gone to such an effort to support the economy and our markets


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