J.P. Morgan has predicted the central bank and the prudential regulator will increase its regulatory oversight of the residential property market independently of cash rate movements.


J.P. Morgan vice-president of real estate equity research Ben Brayshaw says there is “very good reason” to be cautious about the residential sector as lending standards tighten.


“There is more uncertainty on foreign capital and we would argue that the RBA, in conjunction with APRA, is looking to play a greater regulatory role in residential, independent of monetary policy,” says Brayshaw, a speaker at a recent Property Council of Australia event.


“We are seeing lending standards tighten, so there are some good reasons to be somewhat circumspect. Supply is part of the reason for that. The number of new apartments is starting to spike.”


He predicts the supply of new apartments will be an issue next year, primarily in Melbourne and Brisbane, and to a lesser extent in Sydney.


“In Melbourne you have got reasonably concentrated supply of construction in the Docklands and Southbank,” Brayshaw says. “In Brisbane it is similar, concentrated on the areas around South Brisbane and Fortitude Valley.”