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Singles to pay the price of increased housing regulation

Single homebuyers may face a tougher time, experts are warning. (Image: Getty).
Single homebuyers may face a tougher time, experts are warning. (Image: Getty).

Single Australians attempting to crack the housing market may face a tougher time if lending curbs kick in, property watchers are warning.

The average home value across Australia is now $666,514, but jumps to $1.04 million in Sydney and $769,968 in Melbourne.

 Soaring house prices and associated loan values is something Treasurer Josh Frydenberg is watching, while the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia also took note during the latest Council of Financial Regulators meeting.

“The recent lockdowns have reduced transactions and new listings, but prices are still rising briskly in most markets,” the council said in a statement.

“The council is mindful that a period of credit growth materially outpacing growth in household income would add to the medium-term risks facing the economy, notwithstanding that lending standards remain sound.”

The council said APRA would in the coming months share a framework for implementing new lending limits and reducing high income-to-loan ratios.

Singles at risk

While similar rules introduced in 2017 to reduce risky interest-only and investor lending achieved their purpose, these potential rules will likely knock single income buyers out of the competition, co-founder of buyer’s agent network BuyersBuyers Pete Wargent said .

“Single income earners might find that they can’t borrow as much next year, which will make life tricky for those struggling to get into the housing market,” he said on Thursday.

“Similar measures have been used in other markets, including the UK, and the results were mixed. For example, there was a sharp increase in joint income borrowers and a marked decline in first homebuyers on a single income”.

Regulators have been eyeing lending with debt-to-income levels of above six times, RiskWise Property Research CEO Doron Peleg said, with this most likely to affect single-income earners.

New lending where debt is at least six times the size of the borrower’s annual income rose to a record 22 per cent in the June 2021 quarter. That’s well up from the 16 per cent in 2020, while in July, housing credit was growing at its fastest annual rate since May 2018.

“The benefits to financial stability are up for debate, but it’s very likely that such a move would knock more first homebuyers and single income earners out of the market, at the expense of higher-income upgraders and joint income loan applicants,” Wargent said.

He predicts the more affordable capital city suburbs will be in high demand next year due to the impending curbs.

“First home buyers looking to make their move may be wise to do so before any such restrictions come into play”.

House price monitor CoreLogic will release the latest national value growth figures on Friday, ahead of the RBA’s board meeting next Tuesday 5 October.

However, REA Group director of economic research Cameron Kusher believes regulators should hold fire on lending restrictions until Australia is well and truly out of lockdown.

Record low rates have encouraged buyers to buy earlier than they would have, while lockdown living and remote work has also helped many to service bigger loans, he told AAP.

"Waiting to implement macroprudential policy changes until lockdowns have ended will give regulators an opportunity to reassess the market once people are spending less time at home and the 'new normal' conditions are in place."

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