Demand for home loans in Australia seems to be coming off the boil just in time to allay policymakers' concerns about a speculative spiral in house prices, so widening scope for a cut in interest rates next month.
Talk of a housing "bubble" has been rife in the media in recent months and was cited as one reason the Reserve Bank of Australia (RBA) skipped a chance to ease further at its April policy meeting this week.
Yet rising prices were far from a national phenomenon, with the heat concentrated very much in Sydney, where home prices climbed 2.6 percent in the last month alone, and are up 13.5 percent over the year, according property consultant RP Data.
That was well ahead of the second largest city, Melbourne, which managed annual growth of only 6.2 percent. In Brisbane, Adelaide and Perth prices rose between 1 and 3 percent. Indeed, annual price growth nationally has slowed to 7.7 percent, from last year's peak of 11.5 percent,
Likewise, the speculative lending that most troubled regulators was very Sydney-centric. Loans for property investment in New South Wales had risen almost 150 percent over the past three years to account for near half the value of all mortgage approvals in the state.
The national trend was not nearly as strong and now seems to be softening as desired.
Australian Bureau of Statistics figures out on Friday showed loans for investment dropped 3.4 percent in February. It was the second month of falls and left the annual growth rate at the slowest since late 2012.
That could reassure the RBA that steps already undertaken by regulators will curb the worst of the speculation. The country's main banking watchdog, the Australian Prudential Regulation Authority (APRA), has since December been breathing down the neck of any lender that was growing its mortgage book by more than 10 percent per year.
Institutions deemed insufficiently prudent faced everstricter controls, and ultimately an increase in the capital they needed to set aside to cover home loans. APRA can tighten capital requirements for individual banks without having to make it public, which makes it easier to use and thus a more effective deterrent.
"Today's lending data may be early signs that the warnings by the RBA and changes introduced by APRA are having some effect," said Michael Workman, a senior economist at CBA who expects the central bank will cut rates to a record low of 2 percent in May.
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