APRA’s tightened home loan rules could hit NT’s already struggling home construction sector

Banking regulator APRA’s decision to restrict home borrowings could further hit the Territory’s already struggling home construction sector.

BANKING regulator APRA’s decision to restrict home borrowings could further hit the Territory’s already struggling home construction sector.

APRA announced it will increase the minimum interest rate buffer banks use to determine how much a person can borrow from 2.5 per cent to 3 per cent.

With the current average interest rate at about 2.3 per cent, this means banks will assess a borrower’s capacity to pay a 5.3 per cent interest instead of the current evaluation of 4.8 per cent. With record low interest rates and tens-of-billions of Covid response dollars in the economy, property prices in Sydney and Melbourne are surging.

But in the Territory, where the home-build market is in decline, there are fears entry-level buyers will be hardest hit.

Master Builders Association chief executive David Malone said it was a case of Sydney sneezing, and the rest of Australia catching cold.

“Here in the Territory, this is the last thing we need,” he said. “The problem is that APRA does not appear to have targeted any particular market. So, Alice Springs, Katherine and Darwin get stuck with the same change as Sydney, where prices have been running rampant.

APRA announced it will increase the minimum interest rate buffer banks use to determine how much a person can borrow from 2.5 per cent to 3 per cent.Picture: Gaye Gerard

“Putting aside the regional impact for a moment, this measure only really affects first-home buyers.

“Cashed up second and third home buyers already have a lot more money in reserve and usually have higher incomes.

“It is these cashed-up buyers who are driving the current pressure in Sydney – the problems APRA is concerned about are considerably less in western Sydney.

“Our new home building market has slumped markedly.

“Our price rises reflect interest in existing properties, not new homes, and even that market is only recovering lost values which saw prices slump back to 2007 levels until recently.”

The latest fidelity fund figures confirm the slump in demand for new home builds.

In September, 28 certificates for houses were issued across the Territory compared to 42 in the same month last year. Certificates for extensions dropped from 14 last year to 12 in September and overall 42 certificates were issued in September compared to 56 last year. “This is why we need a decent medium to long term approach to encourage Territorians to buy a new home,” he said.

“Our ownership levels are much lower and our population drift harms the entire economy.”

In April the Northern Territory Government scrapped the popular BuildBonus grant, which provided $20,000 and then $12,000 grants for people buiding a new residential home.