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Interest Only Investors

  • Tags: First Home Buyers, Landlords, property investment, property management, real estate, Tax


Interest Only Investors


Since our 2018 Outlook published in December some more data has come out on the effect of investor lending restrictions.
 
Monthly data from the Australian Bureau of Statistics shows that nationally the number of investors has been steadily decreasing, with one expert claiming APRA’s limits on investors as the culprit.

According to December’s ABS housing finance data, the seasonally adjusted figures reveal fix loan lending towards investment housing has declined by 2.6 per cent from November to December last year, equating to a decline of 10.5 per cent over 2017.

In 2014 the first time APRA cracked down on investor lending there was a drop but the numbers started climbing back up within six months. This time around, APRA seems to be hitting the mark.

APRA requested that banks limit investor housing lending in December 2014 and March 2017, with the latter placing additional limits on interest-only lending.



SOURCE: Australian Bureau of Statistics


The Productivity Commission in draft report said the 2017 limits have cost Australian taxpayers an approximate $500 million.

The PC claimed that the regulator’s rationing of finance were a “blunt instrument”.
 
“APRA’s actions to slow new lending in what it determined are higher-risk areas resulted in higher interest rates on both new and existing investment loans, boosted lenders’ profit on home loans and saw a decline in competition from some smaller lenders in the home loan market,” the report read.
 
Further, the PC asserted that most of the banks’ supposed increased profit was paid for by taxpayers through investors interest deductibility arrangements. “Up to half of the increase in lenders’ profit was in effect paid for by taxpayers, as interest on investment loans is tax deductible.”
 
The rises in existing loans only applied to variable rate loans. Commentators point out that anytime you ration a product prices, i.e. interest rates, will equalize.
 
The rationale for the cutback in investor sales was to make room for First Home Buyers and they have been making traction over the last year taking advantage of the retreat of investors on the Gold Coast and nationally. The ABS figures show a year-on-year increase in market share from 13.8 per cent to 17.9 per cent.

 

by David Hamilton

Interest Only Investors
palmbeachfn.com.au February
First National Palm Beach
Corner of 6th Avenue & Cypress Terrace, Palm Beach, Queensland 4221
Phone: 07 5559 9600