APRA happy to be the ‘heavy’ – Andrew Mirams

As we run towards the end of the year, it is timely to look back and reflect on the year.  Andrew Mirams says that APRA appear to be happy with the brakes they have applied to the market in 2017 and he thinks they will continue to pour water on the property sector by having restrictions in place to slow investor activity.   Hear his predictions for 2018.
Kevin:  As we continue our look at the property market for next year in our final show for the year, I’m welcoming into the studio Andrew Mirams from Intuitive Finance, who is one of our regular contributors.
Andrew, pull out the crystal ball for me. What are you seeing for next year? How are you feeling about the property market in Australia?
Andrew:  Hi, Kevin. Yes, the crystal ball, you should have rang me in advance to charge it. It’s always that difficult question, isn’t it?
Kevin:  Yes, it is.
Andrew:  I think the finance, we’re seeing that the market has just come off late 2017 a little bit. APRA’s intention to slow down the market, Sydney and Melbourne in particular, is having an effect around the countryside. I think that they will be quite pleased with that, people not overexposing themselves and things like that.
You now have Sydney into the low 60s or high 50s percent clearance rate. We have Melbourne coming off, moderating. Probably still a strong market and Australia’s strongest market, but it’s certainly starting to moderate and now they’re really particular about the style of property.
And a bit of growth coming in Brisbane, which is probably people who can’t get into Melbourne and Sydney. And with some infrastructure projects up there and things like that, you’re starting to see some good signs in Brissie.
Kevin:  APRA has come out in recent times and said that they believe that what they’ve been doing to tighten the market a little bit has actually worked, slowing it down just a fraction.
Do you think they’re going to be inclined to be buoyed by that and say “Maybe we’ll tighten the screws a little bit more in 2018”?
Andrew:  They’re pleased with the outcomes they’ve been able to deliver. We’ve talked quite a few times through the course of 2017 about we don’t want boom and bust cycles. That’s no good for anyone. That’s only feast or famine. And that’s just not a good market to want to be investing in.
So, they’re trying to level it. They’re trying to bring it some normal growth. Really, what we’re going to see in 2018 from an APRA perspective, I think there’s going to be a little bit more work around interest-only lending and making sure they’re documented and that the clients are getting what they actually want, not just what someone thinks they should have.
The other thing we’re going to continue to see is a lot more focus on everyone’s living expenses. We’ve talked about this a few times, Kevin, and making sure people have some sort of an idea of what it costs them to live month to month. That’s going to be a real focus in 2018.
I think a show or two ago, we talked about 2018 being the year of the living expenses. I’m happy to go by that prediction and think that the credit squeeze, it’s not going to back off just for the minute. We’re going to just have some more scrutiny around responsible lending and making sure the lenders are all doing the right thing by clients.
That said, all the banks are still open for business. It’s just that people are probably hitting their limits sooner than what they’ve been accustomed to.
Kevin:  Just a dumb question, if I could ask it, Andrew. The prudential controls that we saw, particularly in 2017 from APRA, do they have the ability to loosen those in certain areas? In other words, could they say to the bank, “We think you need to continue to tighten the screws in Sydney and Melbourne, but maybe release a little bit more in Brisbane”? Do they have that much control?
Andrew:  That’s a great question, Kevin. I think there are lots of commentators around the country who would say that’s what should have been happening in any case through 2016 and 2017 where you’ve had the Perth and Darwin markets floundering a bit. Also, back in the mining boom, you had Brisbane just ticking along, not kicking goals, and then you’ve had this boom in Sydney, and now Melbourne a year or two later to the party having this boom. So, there’s been really disjointed markets.
Sadly, they can’t or they won’t make rules for domiciles. They’ll just say “These are the rules and we want to slow the whole market down and we want to make sure.” Because responsible lending isn’t a domicile-based decision wherever you live. They’re bound by rules to lend responsibly, so I think that probably has more potential damage to start to pick off independent markets and say “This is now the rule.”
The banks have done it a lot with their postcode restrictions where they know that there’s high unemployment, less housing growth, and things like that. The banks have a lot of data and they’re also probably doing those restrictions behind the scenes versus… We have a bit of a “one size fits all.” Once upon a time, it used to be the Reserve Bank raising and lowering the markets; now it’s the prudential controls, as you said, that’s limiting or restricting the markets.
Kevin:  Andrew, great talking to you, mate. Thank you for your excellent work during 2017. I look forward to working with you in 2018.
Andrew Mirams from Intuitive Finance. You can contact Andrew and his team on any one of the buttons on Real Estate Talk.
Thanks, Andrew. All the best for Christmas and the New Year, and look forward to talking to you next year.
Andrew:  Thank you, Kevin. All the best to you and all the listeners for Christmas, and let’s hope 2018 is a prosperous one for us all.

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