Three events occurred recently that will inject life into the property market.
First, the ALP lost the Federal Election – removing the threats to negative gearing.
Then the Australian Prudential Regulator (APRA) announced changes to lending policy that will make getting a loan easier
And, on the same day, the Reserve Bank (RBA) telegraphed that it will cut interest rates in June.
The recent property downturn was partly driven by the ‘credit crunch’ when APRA was forcing lenders to assume loans were around 7.25 per cent to assess whether borrowers could make loan repayments. Under its new policy, borrowers will be assessed at 6.25 per cent.
Some economists have calculated that borrowing capacity will increase by as much as $100,000.
And other economists believe the bottom of the market will be reached at the end of this year rather than 2020 as previously predicted.
However, while these changes are a shot in the arm for property and lending, Accredited Broker believes that there is still a cooke-cutter approach being applied by the regulators.
The court case between ASIC and Westpac is a case in point
Australians’ living expenses vary enormously, yet ASIC appears to be looking to impose a one-size-fits-all approach to assessing borrowing capacity. But think about it, when it comes to lending, banks’ shareholders expect banks to take into account risk (and a borrower’s living expenses are a key component of this) – so why can’t we trust the lenders’ Risk Teams to assess liabilities accurately? Let’s face it, analysis of company financials shows limited levels of bad debts.
An overheating property market is now under control –maybe it needs another shot in the arm.