By AAP – 22 October, 2014
The Reserve Bank has been slammed for doing too little too late to curb risky lending to property investors.
The Real Estate Institute of NSW (REINSW) says it’s disappointed that the central bank has recently issued warnings about imbalanced investor activity in the property market.
Within the space of six months, RBA governor Glenn Stevens had gone from encouraging property investment to criticising it, REINSW president Malcolm Gunning said.
“Six months ago, Mr Stevens was encouraging investment in real estate,” Mr Gunning said.
“Now that the public is buying properties with confidence, the RBA has changed its mind and is being critical, giving warnings about investing in an over-inflated market.”
Mr Gunning said the RBA was well aware of the impact low interest rates would have on the property market when it began cutting the cash rate in 2011, and yet was only now talking about curbing risky lending to property investors.
“We’re of the opinion that the RBA let it run, the banks obviously got all the money out of it, the taxes have been enjoyed by both state and federal governments, and then they put the warning out after the horse has bolted,” Mr Gunning said.
“Why didn’t they do it earlier? Why wouldn’t you foreshadow it up front, and be a little bit more discerning?
“There should have been measures put in place knowing that the property market was going to scoot.”
Mr Gunning said restrictions on loan-to-value ratios were needed and had they been introduced earlier, many speculative investors would have been kept out of the market.
The RBA in September said it was worried about soaring house prices and rapidly growing investor activity, warning it could pose a risk to the economy.
It warned banks to be cautious with home loans and said it had begun talks with the Australian Prudential Regulation Authority about making sure lenders stick to sound lending practices.
But RBA deputy governor Philip Lowe on Tuesday sought to allay possible fears, saying the potential changes to lending rules would not be heavy-handed.