UDIA cautions against using a heavy stick to credit availability

The announcement today by The Australian Prudential Regulation Authority (APRA) to increase increased the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications, was received by the Urban Development Institute of Australia (UDIA) with some caution.

The move could have the negative effect of pushing people out of home ownership particularly as recent evidence of tightening also shows that it has only a very small impact on stabilising house prices, at a time when there is increasing pressure to make housing more affordable.

Whilst UDIA recognises that there are affordability challenges in the residential market, these are greatly influenced by dysfunctional planning systems, a complex maze of red and green tape, especially with the application of the EPBC Act and an enormous burden of state and local government taxes on the property industry, all contributing to a lessening of supply and negative impacts to affordability.