The Real Estate Institute of Western Australia and the Urban Development Institute of Australia WA Division have spoken out strongly against applying tightener home lending conditions across the country.

REIWA President Hayden Groves said any decision to do so would be a knee-jerk reaction to market conditions on the east coast, in particular in Sydney and Melbourne, and would not be taking into account the varied market circumstances of all states and territories.

“Western Australia’s property market has softened considerably over the last couple of years. If lending conditions are made tougher for existing home owners, new home buyers and investors in WA, this will have a detrimental effect on our local housing market,” said Groves.

The Western Australian market is just beginning to show signs of stabilisation, said Groves, so any disruption at this point could have a particularly negative impact.

UDIA WA CEO Allison Hailes said imposing further lending restrictions may be viable on the east coast where the market is heated, but in Western Australia it will do more harm than good.

“Decision makers in the eastern states need to take Western Australia's delicate economic and property market situation into account before introducing any changes, otherwise we could see the green shoots that are just starting to emerge killed off,” she said.

“Affordability remains a significant issue for West Australians, with the recent slowdown in the mining sector and challenging economic conditions continuing to present difficulties. Tightening lending conditions in Western Australia will have an adverse effect on affordability for West Australian home buyers, owners and investors,” said Groves.

Lending finance for investment represents a substantial proportion of the Western Australian property market, with 35 per cent of all lending in the state attributed to investors.

Even if tightened lending conditions were only applied to investors, increased borrowing costs "would mean investors have no choice but to pass this down to tenants and would also limit the number of investors entering the market,” said Groves.

Hailes said tighter lending conditions would also constrain the housing construction sector, and therefore would mean fewer jobs.

See also:

REIWA welcomes new cabinet

Housing affordability and state property taxes a key concern of West Australians

REIWA puts property on the agenda for upcoming state election