Housing Prices Could Fall if Tougher Lending Criteria Are Introduced | Aveling Homes

Perth, WA - Housing prices have seen significant growth over the last year especially in Sydney and Melbourne where prices have grown 16.2% and 11.7% respectively. Part of this growth is due to increased approvals for property investment loans combined with record low interest rates and a growing economy.

The combination of high investor demand and strong growth is mainly concentrated in these two cities. Property increases over the last 12 months in other capital cities include Adelaide (5.9%), Brisbane (5.4%), Perth (3.5%), Hobart (2.8%), and Canberra (1.4%).

But the Reserve Bank of Australia (RBA) has issued warnings in its Financial Stability Review that continued growth is unsustainable at current rates and that property values would fall. One concern is that lending to property investors and first home buyers is becoming unbalanced as many new to the market are being "priced out".

Experts say that changes to lending criteria need to be made to limit higher risk lending.

The RBA has not specifically stated what it intends to do but concerns about high levels of investor activity were highlighted in its Financial Stability Review. If left unchecked, these issues could potentially create price falls in the property market and have a strong negative impact on the economy.

Changing lending practices would help to slow down demand and keep the housing market relatively stable.

The RBA is currently in discussion with the Australian Prudential and Regulation Authority and members of the Council of Financial Regulators for steps towards more sound lending practices particularly to property investors. Examples would be to introduce limits on loan-to-value ratios and to increase the interest rates.

Tightening other criteria would also likely help to prevent any significant housing price falls in the future but could still slow down.

About Aveling Homes

Aveling Homes is an award winning home builder based in Perth dedicated to providing exceptional service. Find out more about our display homes and our house and land packages by contacting one of our representatives today.

Visit the Aveling Homes website at http://avelinghomes.com.au for more details about our services and available financing options for first time home buyers.

Aveling Homes Contact Information
24/7 Metro Sales: (08) 6144 1000