By Roger Ward

Banks change credit policy to make getting a home loan harder in an effort to stem the Sydney boom. 

But will this potentially kill off investment in regional areas like Cairns.

In the last week, several banks have announced changes to their credit policy under the guise of a sympathetic acknowledgement to ASIC and APRAs concerns that Banks need to assist in cooling the Sydney and Melbourne property markets. 

Last week Westpac, one of the big four banks, announced a raft of changes including stricter lending regulations for investors and more conservative lending servicing criteria across the board for home buyers. Macquarie Bank has followed suit this week with its own range of credit policy changes aimed at reducing its exposure to the investor market and higher Loan to Value ratio loans. 

This will potentially be a very bad outcome for regional areas like Cairns who rely on interstate investor activity in the housing market.

Cairns has not experienced anything like the boom in real estate prices like Sydney however the banks look to be applying 'across the board' changes to lending policy which look to dampen lending activity nationally, not simply in the only 2 markets that are causing a problem, notably Sydney and Melbourne.

Investor participation in regional areas is larger than in the capital cities who have around 28% of homes owned by investors. In Cairns that figure represents nearly 32% of housing stock and in areas like Port Douglas this is closer to 50%.  

With talk over the last year concerning geo-specific macro prudential reforms focusing on the Sydney investor market, these recent changes seem to fly in the face of the very essence of the problem that has developed in the economy, that of a two tier economy where regional areas are still trying to regain their feet after the devastation of the GFC.  

Not only do Queenslanders suffer the highest insurance rates in the country, but now the Federal Governments Regulators look to oversee the potential undermining of the real estate recovery to which cairns is only just starting to see the start of. 

Further concern also is the effect of these credit policy changes on the building sector which is only now starting to show signs of a recovery. 

Roger Ward is the director of cairnsmortgagebrokers.com.au and a 20 year veteran of the banking and finance industry.

Roger is also a Fellow of the Financial Services Institute of Australasia and a qualified financial planner.