When will APRA hose off house prices?

That god for this article at the AFR:

Australia’s banking watchdog is expected to step in and cool the rebounding housing market in 2021, after New Zealand’s central bank telegraphed stricter loan rules are needed to arrest the country’s rising house prices.

The Reserve Bank of New Zealand took a step towards curbing rapidly rising house prices on Tuesday, outlining a plan to reinstate loan-to-value ratio restrictions on high-risk lending from March.

…Independent economist Warren Hogan said his best guess for the Australian housing market next year was a 10 per cent rise.

As such, lending standards will need to be tightened in Australia as early as 2021, he speculated, which would mean action from the Australian Prudential Regulation Authority.

…”The only policy option to cool a surging housing market is prudential,” Mr Hogan said.

Finally, an article recognising the plain truth that APRA is now in control of monetary policy pertaining to house prices.

That said, here’s why I think Warren Hogan is wrong, sadly:

  • Unlike in NZ, the Australian Government will never pressure regulators to tighten. In fact, they are trying to unfetter criminal mortgage lending as we speak. In short, it is much more corrupt.
  • Unlike in NZ, APRA is not integrated with the central bank so it has far less scrutiny. It is a shadowy and secretive organisation thoroughly captured by the banks.
  • Unlike in NZ, Australia’s current mortgage boom is predominantly owner-occupier so it is not speculative nor a traditional financial stability risk. NZ specufestor lending has doubled in a year.
  • Aussie lending aggregates are barely growing, again no threat to financial stability.
  • The Aussie property market is weaker than NZ. It did not have the huge apartment build-out we did in the last cycle so it is tighter and has no immigration overhang.
  • Australian unemployment is materially higher than NZ and its inflation outlook commensurately lower.
  • We have China decoupling underway.

These factors mean a very slow-moving APRA will have to fight against RBA even if they wanted to tighten which they won’t.

It would be a much better idea to ratchet up macroprudential now and cool house prices so that all of the RBA money printing slammed the currency instead. The China decoupling process would be greatly aided by a lower AUD.

But I suspect the always political Morrison Government will elect higher house prices instead to paper over any China decoupling cracks.

I, therefore, do not expect any action from regulators in 2021. Probably not in 2022, either, unless prices tear the roof off, which is not my base case.

From a regulatory standpoint, it is “risk on” for Aussie property for a few years at least.

David Llewellyn-Smith


  1. Hey BlokeMEMBER

    I wouldn’t expect APRA to ‘target asset prices’.

    If Aus house prices rise by 10% in 2021, I’d only expect RBA & APRA to pat themselves on the back.

    • happy valleyMEMBER

      +1 Absolutely, they exist solely to inflate house prices and enrich themselves through their IP portfolios and in any event, Josh will not let them hinder prices to the moon.

    • ………and the government to be reelected, with all this pent up spending to blossom over the period between now and the next election.

      ….and an entire nation to slap itself heartily on the back and say ‘V shaped rebound’ and maybe even print T Shirts proclaiming ‘We rode out the 2020 Recession!’ and bumper stickers stating ‘China: Have a go ya Mug!’

      And then sometime about the time of the next election all those temporary government funded jobs will come to an end, and soon after the election we will hear about ‘Tighten our Belts’ & ‘The debt burden for future Australians’, which presumably will being about the first reports of Australian mainstream banks having lent money to deceased persons for investment properties…

        • No mate…

          They are bedded down in Moscow. DFAT tell us they cannot guarantee we will be able to get them on a flight, if they travel to London or Berlin (or even Rome where I was told there are circa 10k Australians last week). Without them having some form of certainty they wont be stuck somewhere else, there is little point in them going anywhere. My wife is trying to make contact with the woman and kids in Vologda who was in the ABC article over the weekend.

          So at the moment it is still a waiting game. Thanks for asking.

      • Its not even the end of December – every house that has been bought in the last 3 months has a settlement date – and everyone who has bought also has to THEN sell their own house after renovating the new Tree Changer.

        Thats how every single Australian does it – they buy – then put their current house on the market wait a few months then sell.

        Support in JobKeeper has not ended, nor JobSeeker, mortgage holidays are still 30%, and insolvency holidays have still not ended (100,000 businesses).

        People really believe there is a boom – we have 48% of the entire economy on life support , thats how many have had their incomes severely impacted.

        Yes people have been buying houses – but this may come as a shock to many of you – but we have ZERO new buyers in this country 250,000 excess new housing stock and every house bought in the last few months means their current home is about to hit the market to pay for the new home.

        It beggars belief the way people are falling for this rubbish – Macrobusiness them selves posted only LAST WEEK about the HUGE decline in the major cities prices (Sydney Melbourne) while the regionals boomed. How do people just forget or ignore this stuff ?

        • boomengineeringMEMBER

          All true, but there are some that had cash in the bank and withdrew it when the last straw broke of interest rate cut hitting their savings. Many not astute enough to invest elsewhere but the RE comfort zone.

          • There are only a few possibilities – people are buying second and third homes, First Home Buyers, or people have bought with the intention of tree change and are yet to sell.

            WE KNOW that FHB are only 13% of the market. I would suggest that very few would be purchasing second homes, possibly 30 % being really, really generous leaving 60% of the new purchases existing owners who intend to move and are yet to sell.

            Its the only possible explanation and the only conclusion you can draw from it is that people have been suckered into the market and there is a mother of all tsunamis coming in home sales as they all flood the market hoping to sell to pay for the new digs.

            Its a complete disaster.

          • There are only a few possibilities – people are buying second and third homes, First Home Buyers, or people have bought with the intention of tree change and are yet to sell.

            I don’t think your third category is true in any meaningful way. Free-standing houses are still in demand in the capital cities and even more so in the regions (more bang for your buck) and with low supply and low interest rates they are selling quick. There are enough houses being sold in the capital cities for people to confidently make the move to the regions.

            If you have a unit in Sydney or Melbourne and you’re expecting to sell after buying into the tree/sea change, you may have a problem. Then again, if you consider that the median unit price in Sydney is $730K, you could take a decent hit on a unit sale and still have a nice chunk of cash to put towards a house with a backyard in a regional town (all other things being equal).

            We’re seeing a lot of that on the mid-north coast of NSW. I just bought the house we were renting for about 10% more than what I would have paid a year ago. Good quality free-standing houses up here are being sold within days of listing and often with pre-market offers. RE agents here have books full of potential buyers from Sydney and Melbourne who have deposits ready and pre-approved finance.

            This house hit the market on Monday with a price range of $759-$789K and was sold this morning https://www.realestate.com.au/sold/property-house-nsw-port+macquarie-135055166

          • @Hixtar – WHO are they selling to mate ? Each other ?

            There are no new entrants into the market – Macrobusiness released the data last week showing collapsing house prices in Sydney and Melbourne with rising regional prices.

            I showed the explosion in listings in places like Northcote last week for the month of October BEFORE covid ended – it was dismissed as not out of the ordinary – well I said lets wait till Novembers is released and its its higher then we know for sure that we are being conned and things are bad – well here it is – absolute DISASTER.


          • Plod, bloke, your data for one suburb shows that total listings in November are pretty much on trend for this time of year going back to 2012 (155). Properties listed for under 30 days at 89 is above the average of 82. Hardly what I would call an “explosion.”

        • $7T in housing equity in Australia, $1.8T in debt. There is a lot of equity and cash available to deploy if they sense a deal or future price increases. Also, the at risk mortgage portfolio is slowly being brought to heel by the banks and people are been given time to sell and avoid a panic. I avoid listening to corelogic data on sales prices, the PEXA results were interesting to me because they report actuals over time, same with Martin North

          Unfortunately for Australia, those most affected by this recession are not the main owners/procurers of homes and debt. The wealthy asset rich boomers and middle to high income earners have likely come out ahead the last 8 months and are deploying capital into house again.

          Doesn’t mean it cannot crash but you have to ask what could trigger a downturn on the $5T of home equity in Australia? Its here where the risk lies, not in the debt. Any spare consumption cash will get saved rapidly if peoples home values/equity decreases.

          • Disagree – I am from the most affluent inner city (Melbourne) leafy suburbs – real wealth – and most people were smashed – even Doctors, lawyers, accountants, Universities etc – the only thing holding them up at the moment has been the insolvency holidays.

            The workers all got Job Keeper and Job Seeker and made out like bandits. I know pensioners and long term unemployed crims who have done better than ever.

            What I am seeing is a HUGE amount of rubbish data which not only conflicts on the hourly update but is also the complete opposite what even basic analysis of online data shows us – with official releases (ABS) also refuting the spruik.

            I run my own data scraping and what we are being told here and elsewhere is 100% not reality with respect to the major capital cities (Which macrobusiness last week conceded were crashing hard, before saying the opposite, and then refuting that).

          • Iron HorseMEMBER

            What I am seeing in South Australia is the level of stock has significantly decreased over the last 12 months on a yoy basis.
            I wonder if it was initially a ‘I’m not going to sell my property into a shitty (Covid-19) market to now ‘I’m not going to sell my property when it could be worth another 10% within 12 months?’
            The limited stock, especially in inner ring suburbs, has had a massive impact on price imo and, coupled with now, cheap money and looser lending standards it is no wonder prices are skyrocketing.
            It will be interesting to see what happens when/if we get a flood of new stock onto the market for whatever reason…

    • A KPI for the Strayan economy is paying a million (1.5-2 million in Sydney or Melbourne) for truly vile houses that would make Edna Everage throw up. Better off buying for 200-300K in upstate New York.

    • chuckmuscleMEMBER

      +1 and then they will get support from academics publishing spurious affordability metrics such as rent vs interest, as if that is a fair and reasonable comparison and owners have no other carry costs.

        • boomengineeringMEMBER

          Hey Gav,
          Remember when we predicted the investors demise with the inevitable property crash. Well the laughs on us now that they are being forced to cash in on the high, They’ll be laughing now sitting on the cash profits for the next venture.

          • I’m watching regional Victoria and house prices in the regional towns – especially tree change towns has basically halved.

            Only place I am seeing news of a boom is Domain, The Age, CoreLogic, ABC and Macrobusiness….. something in common me thinks.

  2. Another major difference is Australia’s captured population.

    NSW alone will see the arrival of 1000 international students per week come January. New Zealanders are allowed to fly to Australia at will but Australians cannot go to NZ. In fact Australians aren’t allowed to leave their country at all till at least March.

    We have reverted to a prison island. The real estate version of Hotel California : You can take out a mortgage any time you like but you can never leave.

      • I need to get to Indonesia and get tubed / eat satay cumi cumi / sip* Bintangs ASAP. My gills are drying out here on the East coast.

        * Sip with extreme prejudice.

    • Display NameMEMBER

      So in new year we let in 1K student a week when Aussies cannot get home still. The Ponzi rules all.

      • People at the SMH are defending this perverse situation as a safe course of action.

        It’s like arguing with the villagers in a Monty Python skit.

        • Display NameMEMBER

          Only as silly as Americans that have voted against their own financial best interests for decades. GOP and DEM , like Labour and LNP have no real interest in the average punter.

    • With many Australians being scared from all this Coronavirus and moving out into the regions, this leaves a lot of the inner cities empty. It didnt take a genius to see a bunch of NSW Developers rubbing there hands together and saying to themselves, ” We’re going to fill those cities back up again with a huge flow of migrants “.

      Whats happening is Australians are slowly being pushed into the regions and being pushed into poverty.

      All of this is a Real Estate Agents dream. Now they get to sell more houses.

      • Trying to unpack this

        City dwellers scared of Cv (when it’s basically now eliminated)
        Decide to move regions – assuming they have the werewithal to do so
        And making a conscious decision to “move into poverty”
        Implication being regions = poverty

        That doesn’t make sense

        • regions/jobs/house prices. they would come back to sydney at a massive discount to where they were.

        • I suspect that many think Work from home will become normalized post covid. If so a move to the regions now makes sense. Truly widespread permanent WFH would decimate city prices. I personally have my doubts about it though.

  3. “You can take out a mortgage any time you like but you can never leave repay it”.
    And why would you want to?! When debt is virtually free on-demand, what on earth stops you paying $1trillion for a concrete-cancer riddled shack on Bondi Beach? Nothing! It’s costless! The amount of debt is irrelevant. So borrow as much as you want – it’s all a risk free, guaranteed commitment that you will never be allowed to repay – on way or another.

    • Jumping jack flash


      No risk either. Houses are worth whatever we say they are worth, and the bank just doles up the debt to make it happen. So long as the LVR is achieved, then she’s all apples.

      “guaranteed commitment that you will never be allowed to repay”

      The debt is never repaid as such because that would be incredibly deflationary. Instead the debt is routinely transferred to “someone else” and increased each time.

      Everyone gets a turn though. Possibly quite a few.

  4. pfh007.comMEMBER

    “..When will APRA hose off house prices?..”

    Not while the RBA is fully committed to paying top prices for any bank asset than starts smelling like blue cheese.

    Why would they?

    From a prudential perspective the banks have never looked more solid.

  5. Morrison s choice are about what to paper over most/ less. Choose decoupling more paper there is less to bog up UE.

    • happy valleyMEMBER

      Not going to happen when he’s earning ~$900k pa for minimal stress. Yes, Josh – no, Josh – three bags full Josh. APRA couldn’t find its way out of a paper bag, so there’s no chance of them doing anything sensible?

  6. One of the things thats been standing out to me lately is how many people have back problems. A life time of building houses in a Country where Houses is practically a core culture. The thing about building houses, is sooner or later, its a persons back that ends up packing it in. The stubbornness is certainly willing but a lot of peoples health I see, is deteriorating fast. I cant see them keeping this up for too much longer. A lot of these people would work themselves into there grave and I suspect a lot are going to. A lot of people are working through excruciating pain on an almost daily basis just to get out of bed everyday. It seems to me that one consequence of Australias Neo-Liberalist obsession, is we are blowing up peoples health. Im thinking we may not be far away from huge segments of our labor force just disappearing from health issues in a year or so. I dont think it’ll be a choice. A lot are ignoring health issues as it is and working through it. I think a lot of people are just going to wake up one day and there health will have permanently packed it in. From the observations Im seeing, I’d be surprised if some of these people have anymore then 2 years left in them. If Leiths Employment Data from yesterday was right, then with more then 1/3rd of Australias entire Labor Force dedicated to health care, Im thinking Australias Labor Force wont be worth much soon. Im thinking we might be seeing peoples health pack it in and we will begin to see people leaving the workforce in droves… but thats not astute statistics, just a glancing observation.

    • Display NameMEMBER

      Most industries are related to, or a support system for the housing/finance industry. When the key debt peddlers are 26% of the ASX200 by capitalisation, they are the economy.

    • boomengineeringMEMBER

      Bad back is not a death sentence for your employment. Destroyed my back in about 1979, Couldn’t even move my little finger without instigating extreme pain. The doctors advice of doing nothing the rest of my life didn’t sit well, so Inch by inch got back to the weights working around the affected area. As long as I stay active my back is perfect, in my seventies, surf this morn 4.30 yesterday on the bike 4.00am. My client in the gym business ( country boy from Forbes) was due for a back operation that had a 50-60% chance of him never walking again but booked it in due to extreme pain. Showed him old fashion exercise now considered too dangerous, but if no deviation from perfect style it is by far the best remedy. His back is better now than before it was damaged.

    • @Mathias I know a lot of people that you describe in the building industry , I know of one that is in his seventies and still pulling a brush. I think he is crazy but I think financially he has to. Another works seven days a week . Their bodies are going to stuffed by the time they stop if ever. I know a young sparky that would work for an employer and then after hours and weekends and he ended up with chronic fatigue.
      People have forgotten that you work to live not live to work. (Boom is an exception to the rule his discipline and fitness would run rings around some fifty year olds).
      With obvious exceptions I find it sad that some people use their work as a way to value their existence and it is the only thing (in their eyes) that is worthy to define their life on this rock.

      • boomengineeringMEMBER

        Thanks Ukraine,
        The secret is the old adage of short intense workout is better than a long half hearted one.
        Relating this to work means rest time is as important as the others, work, food, rest.
        When some people see me do some exercises they say you’ll wear out, this or that, but I’m not like the Italian woman in the potato field bent over all day. The load was only in that spot for a few minutes once every few days.
        Compete false economy to burn the work candle at both ends for what ? Hopefully they will see the light as I did in 1979 thinking I could lift a valve bent over under a 40ft diam tank requiring a special crane at a worksite. It was for pipework that transported mud and rocks.

    • Stand by for a new NDIS-like scheme for hard working tradies, a pension which will allow them to take out $2M mortgages as part of the BackKeeper scheme. Houses for tradies in the inner metro suburb of Wallan. Something to aspire to in retirement

    • Back in the day when job ads were in the Saturday Age and there was limited political correctness, I often read Plumber wanted, if you are over 35 need not apply. Knees back and liver were often damaged by plumbing (drinking).

      • Mining BoganMEMBER

        Someone always brings a bag of snakes along on training nights, shared between at least 20 of us. That’s enough. She’s eating for twenty minimum. Terrible.

        Gav, you’re an intelligent bloke. Why do you watch this?

        • My excuse is that this found me on Facebook. As to why I watched it. It’s a bit like car crash TV. I couldn’t look away.

  7. Market will be like the behaviour of the 2H 2009 1H 2010 market. Except this time it will be packed into 12 weeks in 1H 2021.
    Market will be running at 100 miles an hour as the blocks open. MacroP by April 2021 IMO.

  8. I expect them to simply don their famous X-ray glasses so they can “look through” the inflation. They might get up for a quick piss, but will go back asleep behind the wheel when they are done.

  9. Jumping jack flash

    Hose house prices? LOL!

    Maybe with petrol.
    If anything they need to lower the standards, not reimplement long-forgotten and archaic standards such as LTI and all the others. These are simply barriers to growth!

    In my opinion 95% LVR is also too low. We need 98 or 99% to really get the place jumping.

    Consider in 2050 when the median house price is around 10 million, 5% of 10 million will be absolutely impossible for a median income schlub to save up in under 50 years, unless we get some serious wage inflation between then and now.

  10. The valuer ended up coming in today. Spent 7 minutes all up, took some measurements, had a look around and commented on what a great house it was.

    Got chatting and he said he’s never seen anything like this boom in 35 years. Reckons we did well with the purchase and there would be no valuation shortfall. He said six months ago, if we were purchasing for the same price we’d have to stump up another $50-60K to meet the valuation shortfall but thought we were spot on with our offer in this market.

    Bloke confirmed what you’ve been saying HnH – this is not a speculative boom. It’s pent-up demand looking for a place to park cash and get out of the cities. People aren’t spending big on toys or holidays and the WFH phenomenon and low interest rates means a comfortable home with a backyard is now within the realms of affordability.