CBA's Bankwest caps loan-to-valuation on investor mortgages at 80pc
A subsidiary of the nation's largest bank has sought to curb the rapid growth in lending to property investors, which has been boosting bank profits but also exacerbating overheating housing markets.
Commonwealth Bank of Australia subsidiary Bankwest has imposed a loan-to-valuation ratio cap on investor mortgages of 80 per cent.
The LVR limit will mean that property investors will need to provide 20 per cent of the purchase price as equity in order to receive the loan.
The move comes hot on the heels of National Australia Bank reducing the interest rate discount it offers to property investors as is attempts to bring its lending book under the 10 per cent growth target requested by the Australian Prudential Regulation Authority, which has also foreshadowed equity capital penalties for banks that do not comply.
Banks are cutting back on lucrative discounts and other special offers to property investors in response to fears about an over-heating property market and lending standards, with The Australian Financial Review revealing that each of the big four banks have contacted mortgage brokers in confidential letters advising them of more restrictive pricing.
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Yup cut to 80% from 90%. Which is for local investors. 90% is too much to begin with, isn't it? And yup locals struggle to put up 20% Deposit.
(21-05-2015, 09:51 PM)newbie11 Wrote: [ -> ]Yup cut to 80% from 90%. Which is for local investors. 90% is too much to begin with, isn't it? And yup locals struggle to put up 20% Deposit.
Used to be 80% LVR very long time ago but over many years, max LVR has been loosened to 95% LVR, some investors even getting 97% LVR IO(interest only) loans.
imagine 100k deposit @ 90% LVR = 1mio loan to buy a property.
now 100k deposit @ 80% LVR = 500k to buy a property.
10% difference in LVR makes the loan half, so many properties will be suddenly unaffordable to buyers.
those local that bought 1mio apartment in Sydney/Melbourne off-the-plan with 100k deposit, if the project finishing later half of this year or next year, they need to suddenly find another 100k deposit to settle, otherwise bank won't be able to provide them the finance and no choice they will have to sell.
They may even copy Singapore and introduce something like the TDSR framework. Ang mo also not that stupid, won't let those Chinamen simply come in and goreng their market, just that they are slower to action than sg gov.
(21-05-2015, 10:21 PM)BlueKelah Wrote: [ -> ] (21-05-2015, 09:51 PM)newbie11 Wrote: [ -> ]Yup cut to 80% from 90%. Which is for local investors. 90% is too much to begin with, isn't it? And yup locals struggle to put up 20% Deposit.
Used to be 80% LVR very long time ago but over many years, max LVR has been loosened to 95% LVR, some investors even getting 97% LVR IO(interest only) loans.
imagine 100k deposit @ 90% LVR = 1mio loan to buy a property.
now 100k deposit @ 80% LVR = 500k to buy a property.
10% difference in LVR makes the loan half, so many properties will be suddenly unaffordable to buyers.
those local that bought 1mio apartment in Sydney/Melbourne off-the-plan with 100k deposit, if the project finishing later half of this year or next year, they need to suddenly find another 100k deposit to settle, otherwise bank won't be able to provide them the finance and no choice they will have to sell.
They may even copy Singapore and introduce something like the TDSR framework. Ang mo also not that stupid, won't let those Chinamen simply come in and goreng their market, just that they are slower to action than sg gov.
Angmo not slower to action but always a lot of hot air and backflip... until they do it, we can only monitor as they have tendencies to react to noise... noise is a by product of rights... rights of vested interests... just look at the backflip by labour state govt in Victoria after they tried to squeeze foreigners... no govt stupid enough to shoot themselves in their own foot since tax revenue from property is the largest and easiest at the moment.
The tax on foreigners to be imposed is a big joke... $5k on 500k or so...
No Vested Interests
If I am not mistaken , Victoria stamp duty for property was very low ?
(21-05-2015, 10:21 PM)BlueKelah Wrote: [ -> ] (21-05-2015, 09:51 PM)newbie11 Wrote: [ -> ]Yup cut to 80% from 90%. Which is for local investors. 90% is too much to begin with, isn't it? And yup locals struggle to put up 20% Deposit.
Used to be 80% LVR very long time ago but over many years, max LVR has been loosened to 95% LVR, some investors even getting 97% LVR IO(interest only) loans.
imagine 100k deposit @ 90% LVR = 1mio loan to buy a property.
now 100k deposit @ 80% LVR = 500k to buy a property.
10% difference in LVR makes the loan half, so many properties will be suddenly unaffordable to buyers.
those local that bought 1mio apartment in Sydney/Melbourne off-the-plan with 100k deposit, if the project finishing later half of this year or next year, they need to suddenly find another 100k deposit to settle, otherwise bank won't be able to provide them the finance and no choice they will have to sell.
They may even copy Singapore and introduce something like the TDSR framework. Ang mo also not that stupid, won't let those Chinamen simply come in and goreng their market, just that they are slower to action than sg gov.
Yup that could be scary. That's why this tightening is good. Foreigners are alrrady borrowing at 70 or 80. A comfortable Lvr to Apra or rba i reckon. But to do like our super micro TDSR is probably beyond their powers or will.. and the implementation of tdsr is very silly if you know the super fine details.
Banking stocks sell-off deepens
The heavy sell-off in bank shares has deepened — led by Westpac’s dive into “bear market” territory — wiping off billions of dollars of shareholder value as the four-year yield trade wanes and investors brace for stricter capital rules.
At the close of trade yesterday, Westpac (WBC) was down 20.1 per cent from its April high of $40.07 — just breaching the threshold for a technical bear market.
Commonwealth Bank (CBA) is down 13.6 per cent, ANZ (ANZ) 13.5 per cent and National Australia Bank (NAB) 14.9 per cent, representing a “correction” for all three, according to strategists at IG Markets.
Things did not improves for the “big four” banking stocks today. By the close of trading on the Australian Securities Exchange ANZ had lost 0.53 per cent to $32.05, while Commonwealth Bank dropped 0.54 per cent to $83.11. National Australia Bank retreated 0.45 per cent to $33.23 while Westpac slumped 0.28 per cent to $32.56.
“The banks have clearly sharply de-rated since April due to rising bond yields, rebounding local resource stocks, lacklustre first half Australian bank earnings, palpable fears of rising capital intensity with NAB and Westpac both raising capital and the rise of China in Asia indices,” broker CLSA told clients today.
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Macquarie joins clampdown on property investors
Macquarie Group has joined the growing number of banks charging property investors higher interest rates, as it faces pressure to curb a rapid expansion in home lending.
After a week in which banks have put the brakes on property investor lending, changes that took effect on Friday will mean Macquarie customers taking out fixed-rate investor or interest-only loans will pay higher rates than borrowers who live in their property.
" It's pretty obvious APRA's initial warning has turned into something a little more strident, and that's why the banks are acting.
Credit Suisse banking analyst Jarrod Martin"
The change was communicated to mortgage brokers this week, following hot on the heels of similar moves from ANZ Bank, National Australia Bank and Commonwealth Bank, which have all scrapped or scaled back discounts offered to investors.
Read more...
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Westpac cuts loan discounts to investors
Following similar moves by its “big four” rivals in recent weeks, Westpac (WBC) today told mortgage brokers — which account for half of new loans — it “will be reducing pricing discretions on new investment property lending” for several products.
Like its rivals, Westpac will not be reducing pricing discretions on loans to owner-occupiers.
The move shows Westpac is upping the ante, after earlier this month revealing it had increased the interest-rate floor to 7.1 per cent for a borrowers’ total debts when assessing if they can repay and adjusted criteria for foreign investors in line with the government’s crackdown. Investment loans make up about 44 per cent of Westpac’s home-loan book.
Happened over the weekend when all the bank measures were announced... demand still quite strong...
Darling Square sellout prompts $1bn unit boom
THE AUSTRALIAN MAY 25, 2015 12:00AM
Ben Wilmot
Commercial Property Editor
Sydney
Michael Bennet
Reporter
Sydney
Building has begun on the first stage of Darling Square apartments.
Building has begun on the first stage of Darling Square apartments. Source: Supplied
Developers are expected to fast-track the release of more than $1 billion worth of Sydney apartments to cash in on surging demand after Lend Lease reaped more than $600 million in the sellout of the second stage of Darling Square project on Saturday.
Listed players Mirvac Group and Payce Consolidated are advancing projects across Sydney, and developer AVJennings is eyeing a major Parramatta site, as they seek to reap rewards from the boom.
The rapid sale by Lend Lease on the site of the old Sydney Entertainment Centre highlights surging demand in the apartment market from first buyers and investors with interest rates at historic lows.
However, the rush among buyers is likely to stoke concerns among policy makers over the level of heat in the property market, with clearance rates at auctions across the nation pushing past the 80 per cent mark across $1.1bn worth of sales. In Sydney, clearance rates — a key barometer of demand — topped at 84 per cent.
Major banks are already moving to slow lending to property investors by tightening pricing discounts and scrapping cash incentives, after the Australian Prudential and Regulatory Authority intensified warnings to slow growth.
Westpac, which has the largest book of investor loans in the country, is also adjusting criteria for foreign investors in line with the government’s crackdown, while Bankwest is requiring investors to have a deposit of at least 20 per cent.
The banks are responding amid growing concerns the three-year property boom is running too hot, particularly in Sydney, increasing expectations regulators will be forced to install strict “macro prudential” tools — as in New Zealand — to head off a painful bust.
“History is littered with examples of unsustainable asset price rises emerging on the back of perfectly justifiable increases in prices. In a number of cases, this has ended badly, especially if there is leverage involved,” Reserve Bank deputy governor Philip Lowe said last week.
Lend Lease’s Darling Square sales, conducted in under five hours on Saturday, were the second release of 581 apartments in the project that is part of a Lend Lease consortium’s larger overhaul of the Darling Harbour precinct. The apartment tower is due to be built on the site of the Sydney Entertainment Centre, which is earmarked for demolition at the end of the year.
“Buyers are predominantly local, with about a third offshore, and over half are owner-occupiers,” Lend Lease managing director, urban regeneration, Jonathan Emery said.
Last year the first release of 538 apartments sold out and the second stage was brought forward to meet demand. Buyers are now awaiting further releases as Darling Square will have a total of 1500 apartments.
Building of the first-stage apartments has started, with the first Darling Square residents to arrive in 2017. Lend Lease expects that the third and final stage of apartments will be released within 18 months.
The sales were handled by agents CBRE and the highlight was the sale of two penthouses on the top floor that sold for a combined total of $22 million, to Australian buyers.
Near sellouts are becoming a feature of Sydney apartment launches. Last month Mirvac sold 221 apartments in one weekend at its 224-unit project Ovo at Green Square. Last year it sold all 174 apartments offered in the first building, Ebsworth.
The Australian can reveal that Mirvac has lodged plans for a luxury complex in the inner-Sydney suburb of Waterloo that will have 226 apartments and be sold later this year.
It is not just inner-city projects in Sydney. At a mid-month weekend launch private developer Toplace reaped $220m as 264 units of 378 sold at its Castle Hill project.
Iwan Sunito’s Crown Group also reaped strong results at the launch of its luxury nine-storey $88m development in Ashfield on Saturday, and sales at Galileo Group’s $200m residential project have been strong, with 80 out of 246 apartments selling at launch.
At the start of the month, Cbus Property sold more than $185m of luxury apartments in the days after a private launch through Colliers International of its Milsons Point residential development 88 Alfred Street. In that case, 106 of the 123 apartments were snapped up ahead of the public launch.
Lend Lease said earlier this month it was expecting a rise in pre-sales revenue by the end of the financial year, with new apartment launches in Melbourne and London over the past six months, and further launches in Sydney and Brisbane over the coming year.
Lend Lease chief executive Tony Lombardo recently told the Macquarie Investment Conference that residential demand in Australia remained strong, and a trend to urbanisation was fuelling demand for apartments .
But he said the group’s share of the Australian apartment market remained “modest” at only about 2 per cent of the sector and it is expanding offshore.
Housing bubble fears unfounded as investors drive boom
FRANK GELBER THE AUSTRALIAN MAY 28, 2015 12:00AM
The NSW property cycle compared to underlying demand, supply and dwelling completions. Source: TheAustralian
The clamour of concern about residential continues, with calls for the Reserve Bank to intervene to stop the boom, and claims investors are rorting negative gearing — followed by demands to abolish it. Then there is inevitable talk of bubbles.
This cycle is different, they say. And I agree. It is investor-led. Hence the relative strength of medium-density and high-rise development. Investors are likelier to buy off the plan than owner-occupiers. You can’t build high-rise without big presales — the banks won’t let you.
In previous cycles, the shift towards a greater proportion of higher-density dwellings has been evident but slow. This has been a great leap forward. And welcome, since new dwellings are now closer to existing services, with cheaper infrastructure requirements.
Now owner-occupiers are coming through, with the upswing spreading to detached housing. The cycle began with low-value housing, then spread to the upper end of the market. But this has occurred before.
This cycle is different. But it has more similarities than differences. We should learn from history. This is just another residential cycle. People are starting to notice how different markets are, state by state, city by city. Now everyone worries about the boom in Sydney, probably because they realise Sydney will stay stronger for longer. They always have been.
But — apart from Brisbane, the last cab off the rank into the upswing — the other cities are already running out of steam, or will soon. Not to mention regional differences driven by population shifts relating to the mining investment boom-bust and the pending tourism boom.
This is not a gentle time. How do we make sense of it?
Since the early 1980s, we have been counting demand for, and supply of, residential properties and projecting them forwards. This has proven to be a reliable indicator of the next cyclical swing. We can’t always get the timing exactly right, and sometimes the magnitude, but it does indicate the direction and quantum of building required.
We estimate underlying demand required to house population increases (by age group) compared with net increases in residential stock to get a cumulative deficiency or surplus of stock, market by market. Certainly, the parameters change. But we’ve been working with this data for over 30 years.
Over the next four years, we need to build more than 170,000 dwellings a year on average to cater for population growth. Given population growth is falling as the mining boom ends, the underlying demand will be decreasing through that period. We’re now building more than the underlying demand. But there’s still a significant deficiency of residential stock, a pent-up demand to be reduced. And it’s not uniform.
The deficiency is highest in NSW where building has been extremely low for a decade so that the deficiency is now more than a year’s underlying demand. That’s huge. And that’s what’s underpinned the strength of the Sydney market. The cycle has a long way to run.
Not so in other states. The residential cycles are out of sync, which is not unusual. Already, some cities are running out of steam. In Western Australia, underlying demand figures are overstated by fly-in, fly-out workers from overseas and the market has begun to weaken.
The Victorian market is headed for oversupply with a huge number of Melbourne apartments coming on the market in the next two years.
South Australia, Tasmania and the ACT are oversupplied and remain weak. And while there is a deficiency of stock in Queensland, the market will take only two years to satisfy pent-up demand.
These cycles, state by state and city by city, will run their course. There is a strong market equilibrating mechanism. That’s why the upswing has been so strong. It’s because of the deficiency of stock.
There is no bubble this time. There are price rises, but we needed these rises to underwrite development and building. And the cycles aren’t over the top — not yet anyway.
Frank Gelber is chief economist for BIS Shrapnel.