Sydney - Australia’s
banking regulator will get new powers to curb property lending both in the
shadow banking sector and in specific geographic areas.
The additional powers and funding for the Australian
Prudential Regulation Authority come after soaring house prices in the nation’s
largest cities stoked concern from politicians and central bankers.Treasurer Scott Morrison said the government will legislate
to extend APRA’s ability to apply controls to the non bank lending sector as
well as “explicitly allow them to differentiate the application of loan
controls by location.” He spoke as he was handing down the federal budget.
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Bringing non bank lenders into APRA’s regulatory purview
will strengthen oversight of a sector that has grown as the big four banks tighten
their lending criteria.
Last year, the big four domestic banks all withdrew from
lending to borrowers reliant on overseas income.
With demand from Chinese buyers buoyant, a number of smaller
players jumped into the lucrative market. In recent weeks, though, bigger
operators have begun to circle, with private equity giants KKR and Fortress
Investment Group reported by the Australian Financial Review to be eyeing the
sector.
Additionally, fresh restrictions on domestic lenders including
a cap on the volume of new interest-only loans sparked concerns some riskier
practices could migrate to the non-bank sector. In a letter to lenders setting
out the restrictions in March, APRA said it was monitoring the growth of
warehouse facilities being provided, saying it would be concerned if these were
of “materially lower quality” than the bank’s own lending.
Giving APRA the ability to regulate by geography would allow
it to target restrictions at Sydney and Melbourne where prices have grown most
rapidly without affecting other Australian cities where market conditions are
more subdued.