Tougher lending conditions may prompt some property investors to instead become owner occupiers, the central bank boss predicts.
Reserve Bank of Australia governor Glenn Stevens says regulatory measures to curb growth in investment home loans are doing their job.
"I predict that we will now see a number of people who used to call themselves investors are going to call themselves owner occupiers because the relative pricing has changed," Mr Stevens told a federal parliamentary committee on Friday.
Many lenders have hiked interest rates for investors and made it harder for them to get loans while cutting rates for owner occupiers in response to a crackdown by the financial regulator.
Mr Stevens said the flow of new lending to investors is not continuing to increase the way it was, and the rate of growth will gradually come back to the regulator's 10 per cent `speed limit'.
"I think the evidence is starting to emerge that the very strong upward trend in approvals for lending for investors hasn't really gone up any further for quite some time now," he said.
Mr Stevens said it turned out that there was a lot more investor lending than was previously apparent, after material revisions to the data.
He also noted that in some cases lending standards were not quite as high as the banks had said.
Mr Stevens said the regulatory measures were about maintaining sound lending standards and capital adequacy, not controlling house prices.
"This is not a claim that we can control house prices by this measure. That may or may not be an effect, but it's about containing leverage which I think's important."
RBA assistant governor Malcolm Edey said the timing of the measures and strengthened lending standards would help make the housing market more stable.
"There clearly is exuberance in the housing market at the moment and this will help to contain some of that."
Mr Stevens said first-home buyers would still face a struggle to get on to the property ladder, as he had, unless something was done about the supply of land and connecting transport infrastructure.
"The answer is not going to be government programs that give you money because that money just ends up in the hands of the sellers, so the answer has got to come on the supply side of the market.
"In a country with this much land something's wrong if we can't do the marginal cost of housing a bit cheaper than we do."
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