Australia’s banks will put their own businesses — and the fragile economy — at risk if they clamp down too heavily on investor lending that has stoked the housing boom, says billionaire developer Harry Triguboff.
“We must tell APRA (Australian Prudential Regulation Authority) that the whole building industry is based on investors.
“It is being underpinned by very low interest rates, and shares are no good (for investment),” the country’s second wealthiest person and founder of apartment developer Meriton Group said. Such actions could start a cycle of falling prices and declining building starts. “APRA thinks its is protecting the banks; I say they will send them broke,’’ he said.
Mr Triguboff’s comments come as banking giant HSBC quietly cut loans to buy investment property for new customers.
In late July, AMP scrapped lending to landlords while other major banks have raised investor mortgage rates as the banks move to comply with the banking regulator’s requirement that investor home loan growth be kept below 10 per cent a year.
With mining’s contribution to the economy waning and business confidence fragile, Mr Triguboff noted “we have nothing left but building”.
While some local and offshore Chinese investors borrowed internationally, Mr Triguboff said APRA and the banks actions would make foreign investors nervous. “Why should they buy in a country where prices could be pushed down,” he said, noting that a withdrawal of foreign investors would hurt housing prices. The proportion of lending to property investors in Australia is about 45 per cent of all home loans, but more than half in NSW, according to economists BIS Shrapnel.
The move from the Hong Kong-headquartered HSBC may come as a warning to many developers waiting for contracts to settle after the off-the-plan sales bonanza of the past two years.
The Australian reported on Monday that the chief executive of apartment developer Frasers Property Australia, Rod Fehring, said the availability of capital from offshore banks would mitigate any problem that buyers had securing finance from the major banks.
Yet even with news that offshore banks are toughening on lending, developers appear optimistic that buyers will not increasingly walk away from settling once the project is completed.
Grocon head of development Dan McLennan said only poorly designed apartments aimed purely at the investment market would have an increase of buyers walking away from an agreed purchase, but he did expect it to slow down the buying of new investors.
“It may impact on the sales velocities of new projects and … on the financing of new projects. We will return to more normal pre-sales. So the ‘all sold out in one day phenomenon’, that will be over and the projects will revert to more normal sales velocities of anywhere between three months to nine months, depending on the size of the project,” he said.
Mirvac Group head of residential John Carfi said that the group had not noticed a change in the ability of buyers to meet their settlement obligations.
This article first appeared in The Australian Business Review.