With the Australian housing market continually stunting, many states have now found that their individual circumstances mirror wider trends, especially in terms of falling house prices in the major cities.
Western Australia has been one of the most affected areas, and now the Australian Prudential Regulatory Authority (APRA) has confirmed that it will not be imposing more restrictions on banks in the state to take some of the pressure off the housing market.
Real estate performance is often one of the key markers for how well an economy is doing, and the knock-on effects of the Australian market dropping could lead to a potential lending crisis. While some people were concerned about house prices skyrocketing and the market moving too far in the other direction, the corrections that have taken place since are showing no signs of slowing down just yet. State politicians are worried about the long-term effects on the country.
With Perth’s average house price already forecast to drop by 2.8% on top of a 4.7% decrease in 2018, the area is edging back toward where it was in 2009, just after the global crash massively wiped out growth and value in markets worldwide.
There are fears that the current state of the banking sector may well mean that Australia as a whole is following a similar trend, but economists have been quick to point out that there are several differences in the global markets compared to 2008 and that key lessons appear to have made an impact. One of the major factors that sparked the events of a decade ago was a poor lending structure for mortgages, leading to a large number of people defaulting on them at once.
This has led to more cautious lending patterns, but there is a growing sentiment that trends have gone too far the other way and are stifling the growth needed to protect against any imminent credit crunch.
The growth in lending has screeched to a relative halt and is at its lowest in 30 years. Federal Treasurer Josh Frydenberg has stepped in to call for ‘affordable and timely’ lending from banks to stimulate growth once more. House prices look like they will not reverse their current dip just yet, and they will unlikely manage to do so without some intervention.
Western Australia Treasurer Ben Wyatt previously warned APRA that the regulator was employing a ‘one-size-fits-all’ approach that was not having the desired effect. Wyatt’s big worry was that APRA introduced measures to cap the ability of the banks to hand out interest-only loans primarily because of ballooning prices in Sydney and Melbourne. Perth had not been seeing anywhere near the same level of unsustainable growth.
Wyatt accused APRA of seeing Perth and Western Australia as collateral damage as it tackled ongoing problems on the other side of the country, and he said that the expected drop in stamp duty was going to have a big effect on yearly incomings, meaning that there could be funding shortfall gaps.
With APRA now agreeing not to levy any more banking regulations on Perth, the region’s real estate market will have a better chance of climbing back up again.