SYDNEY?Efforts by Australia's bank regulator this year to slow a surge in lending to property investors and take steam out of rising house prices in major cities such as Sydney appears to be gaining traction.
Housing finance data for August show the value of loans being written for investors fell 0.4% in August from July, the second monthly decline that economists say will be welcomed by the Australian Prudential Regulation Authority.
Earlier this year, APRA set a benchmark of limiting investor lending growth among banks at 10%, and has been working behind the scenes with individual banks to help engineer the slowdown.
The data for August lends weight to remarks by the Reserve Bank of Australia Gov. Glenn Stevens this week that the investor market might be cooling off.
Earlier this year, senior economic policy makers warned of a potentially dangerous house price bubble in Sydney, pointing to investors as the force behind double-digit house price growth.
Those warnings came as lending to investors began to outstrip lending for owner occupiers, a situation that the RBA said was unbalanced.
Strong house price growth has been a concern for the RBA for some time, with the median value of homes in Sydney recently moving beyond 1 million Australian dollars. The rise, while not seen across the entire country, put a potential brake on further interest rate cuts, even as the economy grew at its slowest pace in four years in the second quarter.
"We expect the share of loans to investors to slide further into year-end, with certain banks still required to pull back on investor lending to comply with APRA regulations," said Tom Kennedy, an economist at J.P. Morgan.
In annual terms, new investor loan commitments grew by 12% in August, which is a notable deceleration from the near 30% on-year run rate recorded earlier this year, Mr. Kennedy added.
"APRA will be satisfied that their measures are indeed working, and their desire to see investor credit ease below 10% should see further soft growth over the coming months, said Daniel Gradwell, an economist at ANZ Bank.
Mr. Gradwell said there are other signs that heat is coming out of investment demand for housing, citing poorer auction sales activity and a slowdown in house price growth generally.
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