APRA’s latest plans good news for Gold Coast investors

By Greg Bell

Just months after the city topped a report on the 'best rents' suburbs across Australia, there's another piece of good news for Gold Coast investors: the Australian Prudential Regulation Authority (APRA) is lifting their 10 per cent benchmark on investor loan growth. 

Introduced in 2014, the cap was part of a range of actions taken by APRA to combat risky lending practices. According to the Authority, the measure is no longer necessary. 

What does this mean for Gold Coast Investors? There's never been a better time to add to their portfolio or even snatch up their first commercial asset.

Why APRA is scrapping the cap

There's been talk of lifting the cap for some time now, but APRA has now written to authorised deposit-taking institutions (ADIs) to announce that they're prepared to remove the benchmark. The move, however, is conditional on ADIs proving that they've strengthened their lending standards. To provide adequate assurance, ADIs must show that: 

  • Lending has been below the benchmark for at least the last six months,
  • All policies meet APRA's standards on serviceability,
  • Practices will be strengthened if deemed necessary. 

Where ADIs fail to meet these requirements, the 10 per cent cap will remain in place.

According to APRA Chairman Wayne Byres, "The temporary benchmark on investor loan growth has served its purpose. Lending growth has moderated, standards have been lifted and oversight has improved. However, the environment remains one of heightened risk and there are still some practices that need to be further strengthened. APRA is therefore seeking assurances from ADI Boards that they will maintain a firm grip on the prudence of both policies and practices."

Good news for Gold Coast investors

When the benchmark was introduced, APRA was highly concerned about widespread instances of fraud and bribery in the financial sector, as well as a range of other risky oversights among the big four. 

"We had too many borrowers who just didn't pay a cent back on their loan and that is unhealthy in the long run," explains Byres. 

In Australia's current lending environment, APRA is less concerned. That said, they will continue to monitor lending standards and the 30 per cent benchmark on interest-only loans will remain in place. 

What will come of the shift? Many forecast the reemergence of competition in mortgage lending, as well as the opportunity for smaller players to compete. 

As Macquarie banking analysis Victor German explained,  "If the cap is lifted it will likely open doors for more competitive tension in investor mortgages, particularly from smaller players." 

Now, there will likely be more options for investors who were once held back from adding to their portfolio. The commercial segment as well – typically viewed as 'too risky' by small time investors – will now become more accessible. 

To find out more about investing on the Gold Coast, reach out to the team at Ray White Commercial Gold Coast today.  

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