Property prices have begun to drop in all of the main Australian cities, including Sydney, causing banks to tighten up on lending.
The Commonwealth Bank of Australia reduced its exposure to apartment developers by more than AU$1bn (£546m) last year, which equated to 23% of the market. Overall lending to property investors grew just 0.5% last year compared to 7.5% growth for owner-occupier loans which was 4.4% higher than a year ago.
One of the reasons for this rise in residential mortgages has been the increase in the amount of loans approved to first-time buyers towards the end of last year. Many Australian states, including New South Wales and Victoria, have offered incentives to first-time buyers to help them get on the property ladder which has also had a positive impact on the figures.
The Australian government is also planning to offer more affordable mortgages to those borrowers that have good credit histories. The Australian treasurer, Scott Morrison, recently introduced draft legislation mandating a system known as “comprehensive credit reporting (CCR)” that will apply to the four major banks (Commonwealth Bank, Westpac, ANZ Bank and National Australia Bank) from July.
Under the policy, the banks will be required to hand over more detailed credit histories on their customers to credit bureaus. The government believes that banks have previously only provided “negative” information for customers’ credit reports, such as whether the borrower defaulted. The new policy will require banks to also provide “positive” credit information, such as how frequently they have paid their bills on time.