Australian regulators too late to tackle home boom, Tepper says

by NZ Adviser10 Apr 2017
(Bloomberg) -- Jonathan Tepper, the founder of a London-based research firm who a year ago warned that Australia had one of the biggest housing bubbles in history, has attacked regulators for acting too late to cool the market as they ignored their own warning signs and were hostile to suggestions property was too expensive, according to the Weekend Australian.

The nation’s banking system was “unstable” and Australians were living in “fantasyland” about the impact of slowing construction on the economy, the newspaper quoted Tepper,chief executive officer of research firm Variant Perception, as saying.

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His comments come after the Australian banking regulator last week tightened lending restrictions and indicated it may take further steps to rein in mortgage loans amid concerns that the residential market is overheating. Australian house prices rose the most in almost seven years in March, data from CoreLogic released Monday showed. The boom is being led by Sydney, where average house values surged 18.9 percent in the previous 12 months, the most since November 2002.

Tactical response
Restrictions on interest-only loans announced last week were a “tactical response” to the growth in lending to property investors, Australian Prudential Regulation Authority Chairman Wayne Byres said in a speech in Sydney on Wednesday. The regulator “can and will do more, or less, as conditions evolve,” he said.

In a speech this week, Reserve Bank of Australia Governor Philip Lowe rebuked the nation’s banks over lax lending practices and warned regulators are prepared to consider further prudential measures to steps announced last week. On Tuesday, he kept the benchmark interest rate at a record low 1.5 percent, and traders don’t see an increase as likely in the next 12 months.

Demand from China would not stave off a housing downturn as demand for “vastly overpriced” houses in working-class suburbs across the nation was questionable, the paper quoted Tepper as saying.

Meanwhile, Ralph Norris, former chief executive officer of Commonwealth Bank of Australia, told the newspaper he doesn’t believe in the “doomsday scenario” as banks have “sophisticated risk-management processes” in place. There was no evidence of mortgage stress in the banks’ provisioning, he said.

Home loans account for more than 60 percent of domestic bank lending in Australia.

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