Regulators have signalled their intention to impose conditions which will see lending  criteria tightened. How this will be applied is a case of wait-and-see. 

Often, it’s investors who are the focus of macroprudential intervention, although the  market in recent times has been largely driven by owner-occupiers.

Governments and regulators must be careful not to discourage investors because of the critical role they play in a rental market already under stress.

It’s not a chicken-and-egg scenario. Tenants who want to rent a property need for a  landlord to be willing to take on debt to provide them that security.

We know that, despite common misconceptions, the vast majority of investors are not  uber-wealthy by default. Most have one investment property, acquired through debt  which they are servicing to prepare themselves for income during retirement, or which is already providing essential rental income to them in retirement.

Make property investment too arduous or prohibitive and people can look to other asset  classes like the equities market, which do not put a roof over peoples’ heads.

Restricting the ability of people to access finance may limit the size of the offer they’re  able to make on a property but does not soften demand, because buying or renting a  home is not a choice for people. It’s a necessity.

When it comes to issues such as price surges and affordability, the responses from  Governments typically amount to noise. Ideas like swapping stamp duty for property tax  and crackdowns on negative gearing are smoke which clouds the reality that these issues cannot be solved while the gap between demand and supply is widening. 

The forthcoming intervention on lending criteria has all the hallmarks of more noise. 

It will be interesting to see how the market behaves in the wake of this coming  intervention, especially in the context of a new Premier in New South Wales, and with  the reality of the 70% double vaccination landscape soon to be revealed.

The residential housing market is powering the economic recovery, so any regulatory  tinkering must be careful not to jeopardise this, a point which must be recognised by the  state’s new leader.