The recent property downturn was unique – and this period of growth is unique too.
For the first time, the recent downturn was driven by changes to credit policy (not interest rates or unemployment).
Similarly, the way lenders approve loans (or not) will put a cap on this property market.
The property market is moving. But will it continue to do so? Getting a loan has become easier and rates have dropped.
But lending is way more sophisticated to the way it was 10 years ago; banks are way more choosy about the loans they accept and, behind the scenes the regulator (APRA) is prepared to…..
A decade ago, banks approved loans based on pretty much based on an applicant’s income and the Loan Value Ratio (LVR).
This time lenders are adopting a more sophisticated approach to lending for example:
Westpac has followed Macquarie’s approach of offering higher interest rates to loans with risker LVRs
- CBA is questioning whether too much of the household income is focussed on servicng debt
- The Big Four are now proving customer be heaviour data under Comprehensive Credit Reporting which means that those who struggle to pay loans are less likely to have further debt approved
- Many banks limit their lending exposure in certain postcodes
- Behind the scenes there is talk of the regulator, APRA prepaing to impose limitations on lending to those looking for loans that would be at a high debt to income ratio.
The lending environment is now very complicated. Only a broker will know if one bank has more generous policies than the customer’s own bank
Behind the scenes there is talk of the regulator, APRA preparing to impose limitations on lending to those looking for loans that would be at a high debt to income ratio.
With clearance rates at c80 per cent, the property market is clearly in recovery. With Australia’s population growing by more than 350,000 per annum means strong property demand remains.
But macro-prudential policies mean that the banks are unlikely to abet the price growth of the past.