TOUGHER lending rules by Australian banks are giving foreign investors an unfair advantage in the property market, according to Aussie Home Loans founder John Symond (pictured).

The finance industry veteran says that while he is comfortable with a broad range of initiatives introduced by the Australian Prudential Regulation Authority (APRA) to protect borrowers, he bluntly describes the squeeze on investment loans as 'dumb'.

"My concern is with the unintended consequences," says Symond, who this week addressed the 2016 Titans of Industry Forum at Bond University. "They didn't think it through; they didn't consult."

Symond says the fallout from new lending rules, which include lower loan-to-value ratios, have created a further barrier for first home buyers to get a start.

"They've made it harder for Australians to get into housing and investment loans.

"They've opened the door wide up for all the foreign investors to have a bigger choice of properties and they've driven a big nail in the coffin of first home buyers.

"I think that aspect of APRA was dumb, but there are probably more positives than negatives to it."

Among the positives is the push away from interest only loans, which Symond says make no sense for owner-occupiers in particular. He says home owners should be paying down their mortgage as quickly as possible in a low-rate environment.

That trend is reflected in new figures compiled by Aussie Home Loans and CoreLogic RP Data.

Symond says the data shows that equity levels are on the rise across the $100 billion loan book held by Aussie Home Loans. He says this is driven by both price growth and extra payments on loans by borrowers.

Equity across the national loan portfolio is close to 50 per cent, while in Sydney it is 60 per cent, driven largely by strong price growth in that market.

The Gold Coast is sitting around 40 per cent, implying future potential for that market.

Symond says first-home buyers need to explore regional markets such as the Gold Coast if they want to get a foothold into the property market.

While RP Data's senior research analyst Cameron Kusher conceded some of APRA's new lending measures for investors are 'harsh', he is more concerned that proposed changes to negative gearing will knock the residential recovery off its feet.

"Negative gearing has been in place for a very long time, but it wasn't until the capital gains discount was halved that we saw a massive increase in negative gearing," Kusher says.

"That's probably an area to look at if they want to make changes. But I don't think you can make a dramatic change in a point in time, it has to be a stepped change."

Century 21 chairman Charles Tarbey sees changes to negative gearing as inevitable from both sides of politics.

"I believe it is going to be on the table whether we like it or not," says Tarbey.

"We don't have a choice. The platform is available to both (major parties) and one of them will make changes to negative gearing."

As for the emerging hotspots nationally, Kusher says big price falls in Perth make that market worth exploring from a value perspective for investors.

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