Interested to get people’s opinion on how the banking royal commission and the stricter lending policies of the banks will have on the housing market in Australia?
Anybody’s guess Peter!
I don’t think that the Financial services RC will have much impact on lending. The majority of issues were related to advice and collusion in the banking networks.
Overall though a stricter application of lending criteria -that were already in place-will slow down investor lending and will likely take about 3-4 years to return to normal.
Just my opinion, I think that 1 and 2 bedroom apartments will underperform for up to 5 years but will be stabilised by a reduction in new projects.
If I had a crystal ball . . . . .
If people can’t borrow as much money as they once could then they can’t pay as much for their next house so I wouldn’t expect it to grow at the same rate in the short term.
I think areas dominated by investors (think suburbs filled with townhouses & apartments) will struggle. Especially as the interest only loans favoured by investors are harder to come by you’ll probably see investors selling as the properties become too hard to hold onto with a P&I loan.
Areas donated by owner occupied families will likely continue along fine. It’s amazing what people will cut from their monthly spend to hold onto the house.
Of course this is all crystal ball gazing but if borrowed money becomes harder to get, prices can’t keep going up at the same rate. Where will the cash come from?
All the best.
My opinion is that the banks have pretty much shut their books to investors looking to acquire property....on the back of the changes in their lending covenants, it seems that they are all now overcooked on investor business. Atr the same time the Royal Commission has everyone running scared (not necessarily a bad thing) and they are making everyone jump through a LOT more hoops to secure funding.
SO this leaves the market with a few less buyers, which is having the same effect as jacking up interest rates......its taking the "heat" out of the market.
Great news for the government, because they dont need to lean on the Reserve Bank to jack up interest rates to manage inflationary pressure from an out of control housing market.
Or am I just being cynical??? surely the monetary system in Australia is robust and free from influence from a controlling government????? Surely there is no collusion between the very small number of large main players in the housing market???? Surely the always pass on 100% of the rate cuts as demonstrated over the past few years of ever-decreasing cash rates???? Oh......hang on.....they DIDNT pass on the rate cuts did they.....so the banks ALLLLLL independently made the decision to maintain rates despite a cut in the cash rate....each and every time......go figure.
I know that this has turned into an anti-bank rant, but the banks and pseudo banks need to get their shit sorted. Until they do, I suspect its not going to get any easier to obtain finance, which cannot help but have an effect on the housing market.....
It is a good question and something we are all keeping our eyes on.
there is no denying that borrowing capacity has dropped - however this is a result of over 18 months of policy reforms, not just influenced by the Royal Commission.
We are still settling many loans, if not we have actually never been busier but what is profoundlyl different is the time it takes to get your approval. What would be approved in 2-3 days on a worse case scenario, is often taking 2 weeks to get approved.
We had a loan settle last month that took 5 weeks to get approved - same lender just lots of going back and forth between client and lender due to the complexity if the situation. Patience is key at the moment, and when people are buying homes, being patient is quite difficult!
I do believe an area where there could be an impact is Off The Plan units. When credit was at its peak, many people exchanged with a 3-4 year settlement period. There is a huge risk here whereby clients exchange, are unable to get finance approval (of if they did, it does not mean anything today) and lending policy has tightened up and there will be a a proportion of people who will be unable to fulfill their obligations. This will be very interesting to see as they will not be able to sell for the same price they purchased for resulting in losses.
Hope this helps,