New APRA and ASIC investment lending regulations are set to put the brakes on Brisbane's housing supply and push up prices.
QUT property economist Dr Lyndall Bryant said home buyers, property investors and developers faced a brewing perfect storm from recent changes to lending rules and a falling Chinese currency.
"This could spell a return to the post-GFC finance-driven squeeze on housing - when housing supply falls, demand pressures push up house prices and housing affordability becomes a problem," Dr Bryant said.
"Changes in lending regulations that are designed to cool the Sydney and Melbourne markets will have negative effects on Brisbane's housing supply and housing affordability.
"APRA (The Australian Prudential Regulation Authority) intends to actively discourage property investors from taking on higher risk mortgage lending such as interest-only loans, high loan to value ratio loans, and loans with very long terms," Dr Bryant said.
"APRA's aim is to 'reinforce sound lending practices by setting a threshold of 10 per cent growth in authorised deposit-taking institutions' lending portfolios over a 12-month period'.
"This means that from July 2016, banks will be required to increase their equity allocation on residential mortgages used for investment purposes from 16 per cent to 25 per cent.
"At the same time, ASIC (Australian Securities and Investment Commission) has signalled it has interest-only loans in its sights for reform.
"Interest-only loans are hugely popular with residential property investors. They represent 37.4 per cent of all home loan approvals in Australia, increasing to 42.3 per cent in the March 2015 quarter.
Dr Bryant said the triple whammy for housing supply would be in the effect on pre-sale buyers and developers.
"Many off-the-plan buyers will be counting on getting 100 per cent loans to finance these purchases with demand for interest-only home loans having grown by around 80 per cent since 2012.
"At the moment here are 9,963 apartments under construction in Brisbane and another 17,428 approved for construction.
"When these apartment buildings are completed, investors are going to have problems securing finance to settle on these apartments.
"Because the banks are already factoring this future settlement risk into their loans for new projects, they are requiring higher debt coverage by way of increased presales. This means it will be more difficult for developers to get new projects out of the ground and fewer new projects will start."
Dr Bryant said developers relying on pre-sales to Chinese nationals would be wondering if these buyers would be able to pay on settlement day.
"This is bad news for developers, banks and the industry. Developers are left holding completed stock while they exhaust their legal avenues for payment," she said.
"The apartments eventually enter the market sometime after completion at fire-sale prices. Developers with large balance sheets might survive these uncertain times, but smaller developers are likely to fold under the financial pressure."
Dr Bryant said it's not just the apartment market that would suffer.
"House and land estates also rely on pre-sales to obtain funding for construction."
Media contact: Niki Widdowson, QUT Media, 07 3138 2999 or n.widdowson@qut.edu.au.
