Jul 25 2015 at 12:15 AM Updated Jul 25 2015 at 3:47 AM
APRA bank loan changes put the brakes on property investors
The consensus among economists is that the housing boom has peaked, writes Larry Schlesinger.
Banks have turned the screws on property investors. Henry Zwartz
by Larry Schlesinger
The wheels might not have come off yet but the investor demand that has driven Australia's property boom is starting to wobble.
This week's announcement by the Australian Prudential Regulation Authority (APRA) that the big four banks and Macquarie Bank must hold more capital against their gargantuan mortgage books to provide a buffer against defaults will apply further pressure to housing growth. The banks are already increasing home loan rates to meet more expensive funding costs.
Combined with the blizzard of tougher lending policies already introduced by the banks this year, to slow down investor lending growth per bank to less than 10 per cent a year, the consensus among economists is that the housing boom has peaked.
Predictions from respected economic forecaster BIS Shrapnel that Australia will have built too many new homes by 2018 makes the picture a lot gloomier, especially for those looking for quick capital gains.
Property analysts say Sydney and Melbourne, where there has been the greatest acceleration in prices and where investors have dominated, will be hardest hit. House prices in Sydney have surged 20 per cent over the past year, and 10 per cent in Melbourne.
Brisbane, Adelaide, Hobart and Perth, where there has not been the same price growth, will not see the falls, analysts say. Darwin, hit by the slowdown in resources, has had little price growth this year. In Canberra, where house prices have increased by about 5 per cent over the 12 months to June, Domain senior economist Andrew Wilson expects more house buyer activity, although apartment prices are falling thanks to oversupply.
This is how much the banks have turned the screws on investors. All have reduced loan-to-value ratios (LVRs) on investor loans, with Westpac, the nation's biggest lenders to investors, slashing its LVRs earlier this month from 95 per cent to 80 per cent (meaning a $200,000 deposit if you're buying a $1 million dollar home). Investors must be able to service loans at higher than 7 per cent (a 2 per cent buffer), pushing more to the sidelines or requiring them to downsize their buying ambitions.
Banks have also removed mortgage discounts from investor loans and have cut back on offering riskier products such as interest-only loans. Some, such as ANZ Banking Group, have removed the cash-flow benefit of negative gearing from investment lending policies and both Commonwealth Bank of Australia and Westpac have reduced the proportion of rental income they will consider when assessing mortgage serviceability.
"Confidence from investors in markets like Sydney is going to start to wane," says CoreLogic RP Data's head of research, Tim Lawless. "There is a growing acceptance that the market has run its course."
WEAKER GROWTH
Logically, fewer investors out there means less competition for property and less pressure on house price growth, which, according to economists including Paul Bloxham of HSBC and Shane Oliver of AMP Capital, has already peaked.
Both economists anticipate weaker levels of growth for the remainder of the year and into 2016, with expectations that prices will start falling from 2017 when the Reserve Bank of Australia could start raising rates again.
"If mortgage rates rise as a consequence of more stringent capital requirements on housing lending, this is likely to be a drag on housing activity because mortgage rates are still the key driver of activity in the established housing market," Bloxham says.
Oliver, who expects prices to fall by between 5 per cent and 10 per cent in 2017, says it's unclear yet what impact the APRA measures will have on the housing market. But he says the RBA and APRA both want to see a slowdown in lending to investors and more heat coming out of this market.
What the RBA does not want to see, Oliver says, is rising rates for existing mum and dad borrowers. The impact of this would go beyond the housing market into sectors such as retail spending. Were this to happen, both Oliver and Bloxham believe the RBA could cut rates to dampen the effects. "It's a 50-50 call whether there's another rate cut," Oliver says.
The latest data from the country's biggest mortgage broker, Australian Finance Group, which shows investors in NSW quitting the market in droves, suggests the cumulative impact of the changes is having the desired effect.
Its June-quarter figures show that the proportion of investor loans in NSW, consistently at about 50 per cent of all lending over the past 12 months, fell to 42 per cent over a three-month period. This is likely to affect investor buying across the country.
"Investor lending has returned to levels we are more used to," AFG chief financial officer David Bailey says.
Depending on how much lenders increase rates due to the APRA changes, Bailey says it may bounce some people out of the market. "It's very early days, but initial discussions with some lenders suggest increases of between 10 and 20 basis points."
Other analysts, such as CLSA's Brian Johnson, believe the rate rises could be higher but the clear message is that they are going up.
ANZ and CBA have already moved, announcing they will lift interest rates on a range of fixed and variable investment loans by between 10 and 40 basis points from August to ensure investment lending growth does not exceed APRA's ceiling of 10 per cent.
But both banks will also cut rates by between 30 and 40 basis points on fixed-rate loans for owner-occupiers, with ANZ's Australian chief executive, Mike Whelan, telling Fairfax Media there will be a heightened focus on "owner-occupier and first home buyers in the country".
PERIOD OF UNCERTAINTY
Gerald Foley, managing director of National Mortgage Brokers, says first-time investors without the equity and cash flow to satisfy the banks' new requirements will be the ones most affected.
More broadly, the changes are creating an unusual period of uncertainty between lenders and borrowers, particularly for investors who have employed a particular investment strategy.
"In the short term it won't have a significant impact, but if there is a sustained period of continued tightening it will have an impact. It will take confidence out of the marketplace," Foley says.
The winners out of all this, he says, could be first home buyers. "With some investors sitting on the sidelines, there may be better opportunities for first home buyers to acquire property, which is potentially part of the impact regulators want to see," he says. "Banks still have money to lend and are offering sweeteners on the owner-occupier side."
CoreLogic RP Data's Tim Lawless believes there will be a correction, "but it won't be of the magnitude that some commentators are forecasting – 20 to 30 per cent. It will be a gradual moderation."
But certain pockets of the market are at greater risk of correction, he adds. "When you look at areas of the market most susceptible, it's the investment markets where there is a lot of new supply – the inner-city apartment markets and the outer suburban greenfield housing estates."
Among the inner-city investor-dominated apartment markets, Lawless points to Melbourne, where there is much greater geographic concentration around the central business district, Docklands and Southbank.
"The risk is much less in Sydney though, because dwelling approvals for apartments are not as high as Melbourne and the geographic distribution is much broader, spreading out to places like Parramatta, Lane Cove and Chatswood."
Others, such as veteran mortgage market analyst Martin North, expect a "slightly negative impact on mortgage pricing" from the APRA changes, but do not believe there will be much impact on the broader housing market.
"House prices are a factor of supply and demand," North says. "There is rising supply, but also strong demand. Compared to other asset classes housing is doing a lot better, plus there are all the tax concessions like negative gearing and the ability to offset capital gains.
"The supply of investment loans will still be there. Remember that not all banks are growing their investment lending at 10 per cent. Some will see it as a target. And there's also the opportunity for the non-banking sector to fill the gap if the majors disappear from the radar."
Foley says this is already happening: "We are seeing increasing appetite in the broker market for specialist lenders like Pepper, Liberty and LaTrobe who can better tailor deals in the current market."
My take - most banks are trying to slow loan demand so that they are in compliance with max investor loan growth of 10% - ie not choking off demand as widely feared by the mkts...
"The bank, which recently announced a reduction in loan-to-value ratios on investment loans to 80 per cent, has described the move as another measure to limit annual investment lending growth to a maximum of 10 per cent, as mandated by the Australian Prudential Regulation Authority."
Jul 26 2015 at 3:18 PM Updated Jul 26 2015 at 7:59 PM
Westpac tightens lending for foreign property investors
Mortgage brokers claim Westpace's clampdown is targeting the lucrative Chinese market, which that has been spending billions on residential property, particularly in Melbourne and Sydney. Paul Jeffers/Getty Images
by Duncan Hughes
Westpac Group is clamping down on lending to overseas property investors wanting to buy residential property in the nation's popular residential markets.
The bank, which recently announced a reduction in loan-to-value ratios on investment loans to 80 per cent, has described the move as another measure to limit annual investment lending growth to a maximum of 10 per cent, as mandated by the Australian Prudential Regulation Authority.
The bank's broker distribution division is writing to mortgage brokers identified as having a "higher percentage" of property lending to people not resident in Australia.
The letter does not identify the lending benchmark that triggers the review.
AUSTRALIAN ADDRESS REQUIRED
"As a result, all future home lending applications that you submit to Westpac must contain a primary application that has an Australian residential address," a leaked copy of the letter states.
That means the applicant must have an Australian visa and conform to Foreign Investment Review Board criteria. Non-residents need to obtain FIRB approval when buying property – a rule that is now being more actively enforced.
The bank could not comment on how many brokers had received the letter.
Mortgage brokers claim it is targeting the lucrative Chinese market that has been spending billions on residential property, particularly in Melbourne and Sydney.
The letter also states the review is a "timely reminder" about the bank's review and auditing procedures to ensure brokers conform to their agreement.
A spokesman for the bank said: "It's just a reminder to brokers with a higher percentage of non-resident lending that when submitting owner-occupied applications [they] should contain an Australian residential address."
PRESSURE FROM REGULATOR
Banks are rapidly changing their rules for lending to property investors, a response to pressure from the banking regulatory to reduce the amount of investor activity in the property market.
Last week ANZ Banking Group and Commonwealth Bank of Australia both lifted their lending rates for all landlords. Earlier this month Westpac announced it would require applicants for property investment loans to have a deposit equal to 20 per cent of the property's value, up from five per cent.
In addition, mortgage brokers claim competitive investment pricing has stopped.
"The rate is now the rate," said Chris Foster-Ramsay, managing director of Capital Home Loans, about Westpac no longer negotiating on investment loan rates.
Other measures aimed at reducing the demand from investors for property loans include reducing interest rate discounts, increasing interest rate "sensitivity buffers" and ruling out some types of income such as bonuses, when assessing an applicant's ability to repay a loan.
Jul 28 2015 at 4:03 PM Updated Jul 28 2015 at 7:13 PM
Visa rules could knock over apartments
Eugene Chen, left, with Harry New, partners in Hall & Wilcox Lawyers, believe the future of the significant investment visa scheme will be dictated by politics. Pat Scala
by Matthew Cranston
High-rise apartments development in Australia has been dealt a blow by changes in the significant investment visa rules with more than a dozen funds that channelled investment money into such projects now barred from doing so.
Hall & Wilcox partners Harry New and Eugene Chen have advised on and created over a dozen significant investment visa funds for residential real estate projects.
"We have a number of Australian based developers and – they are frustrated because they had projects geared towards residential development using SIV funding and now that cannot be done," Mr Chen said.
"We have a lot of development permits outstanding in Melbourne at the moment and these SIV changes may prevent some of these developments from ever getting off the ground."
On July 1 the federal government's new rules on significant investor visas – the ticket for which millionaire foreigners can gain residency in Australia by investing $5 million into complying investments – came into affect but not everyone has been happy with the outcome.
The new rules exclude bonds as an investment type and seriously curtail the level of investment in residential projects. Previously SIV compliant investments could include an investment in a large residential development now they can only invest through a managed investment scheme whose investment is no more than 10 per cent the value of the relevant scheme's net assets under management.
"We have fund managers in China who have spent hundreds of thousands of dollars preparing these funds [for residential development investments] and all the legal documents but now they can longer do this," Mr Chen said.
"We think about 90 per cent of [the funds] are no longer compliant."
As of March 2015, Australia has received $3.755 billion in significant investment visa funds.A breakdown of how much of this money is channelled into property is not recorded but the flow into managed funds – the likely place for real estate development – is roughly 52 per cent.
The new rules also force part of the required $5 million into such products as venture capital and small capitalisation equities funds, which some say could cause a dangerous speculative run on the sharemarket instead of addressing possible housing affordability problems.
"If the justification is that they wanted Chinese investors to invest in increasing housing supply then they should have allowed investment in development," Mr New said.
"Where there is under supply of residential housing or overpricing of residential housing this SIV investment in residential property development could potentially going a long way in addressing the issue," Mr New said.
Both Mr New and Mr Chen believe the future of the scheme will be dictated by politics.
"The outcome may also have been politically influenced due to the large volume of property acquisitions by Chinese and the perceptions it generated."
More than 90 per cent of successful SIVs are for Chinese, equating to more than $3.3 billion in funds.
Jul 29 2015 at 3:30 PM Updated Jul 29 2015 at 8:54 PM
Chinese buyers 'squeezed' by sharemarket crash and banks
Anecdotal evidence suggests some Australian property deals could be axed because buyers have suffered heavy losses on China's bourses. Reuters
by Duncan Hughes
The Chinese sharemarket correction and tightening of local banks' lending to overseas investors could slow foreign investment in Australian property markets, according to property specialists.
Andrew Fawell, director of the Beller Group, a diversified property group with offices in Shanghai selling Australian property to Chinese investors, said there is anecdotal evidence some investments could be axed because buyers have suffered heavy losses on China's bourses.
"Reports are coming in of investors claiming they have lost all their capital on the stock market and cannot go through with the deal," Mr Fawell said. "The Australian market has to be braced for unexpected events."
Westpac, the largest lender to overseas investors, is clamping down on offshore investors wanting to buy residential property. Its broker distribution division is writing to mortgage brokers identified as having a "higher percentage" of property lending to people not resident in Australia and asking that future applicants have an Australian residential address.
Brokers claim it is targeting Chinese buyers, who have been spending billions on residential property, particularly in Melbourne and Sydney.
The major banks and AMP Bank are tightening investor lending by raising interest rates, lowering loan-to-value ratios and ruling out some income, such as bonuses, when assessing an applicant's ability to repay a loan.
The falling Australian dollar, local education and lifestyle are expected to ensure the Australian market remains attractive over the longer term, Mr Fawell said.
A locally based Chinese developer, who did not wish to be named, said stricter lending rules are unlikely to impact investors in existing deals because most have stage financing, which means committing the money in instalments as the company meets pre-arranged goals.
"From a corporate perspective, it might affect a deal coming to fruition over the next few months, assuming stock markets in China don't rebound," the developer added.
Home price growth weak outside Sydney and Melbourne: CoreLogic RP Data
THE AUSTRALIAN JULY 31, 2015 1:50PM
Kylar Loussikian
Journalist
Sydney
A home is auctioned in Melbourne’s Caulfield North. Source: News Corp Australia
Home price growth in Melbourne is expected to hit a record high in July after values jumped 4.8 per cent in just 30 days, up from 2.9 per cent growth in June.
In Sydney, house prices are expected to rise 3.2 per cent for the month, compared to 2.8 per cent in June, according to figures to be released by CoreLogic RP Data on Monday.
The figures will confirm another strong month of housing price growth in July in Melbourne and Sydney, but with growth outside the two cities remaining weak.
The biggest previous increase in Melbourne values was in July 2014, when home values grew 3.7 per cent.
The last time Sydney home values grew more than 3.2 per cent was in September 2009, when growth hit 3.4 per cent.
CoreLogic researcher Tim Lawless said the rest of Australia’s capital cities were expected to record flat results, with Adelaide home values set to recede.
Overall, capital city price growth outside Sydney and Melbourne is expected to be less than one per cent.
“Growth over the last quarter has been very strong despite the May figures being very soft,” Mr Lawless said.
“The monthly figure can be volatile, so we prefer to look at the trend, but even that looks quite strong.”
The big increase in home values is likely to generate more concerns about housing affordability.
Adding to the gloom for capital city buyers today was the Housing Industry Association affordability index, which fell in the June quarter, meaning houses became less affordable.
“The positive impact of a second interest rate cut for the year in May was overwhelmed by an increase in the CoreLogic RP Data median dwelling price and the persistence of sluggish earnings growth,” HIA chief economist Harvey Dale said.
“The net negative impact of these factors saw the affordability index fall by 2.9 per cent to 79.7 in the June 2015 quarter.”
However the index masks wide variations around the country, Dr Dale said.
Sydney and Melbourne drove a 3.6 per cent decline in affordability in capital city markets, while there was a 2.7 per cent improvement in regional Australia.
“The large differences in the results for the capital city affordability index and its regional counterpart, together with the variation in outcomes between capital cities, exposes the folly of sweeping generalisations which refer to an Australian housing boom,” Dr Dale said.
“That is simply not what is occurring — in many parts of Australia the extremely low interest rate environment is delivering historically favourable affordability conditions.”
Earlier this month the Reserve Bank said housing affordability issues weren’t particularly alarming, with home ownership rates neither “unusually high nor unusually low” compared to other countries.
But the central bank said the stable rates of home ownership had masked a decline among younger Australians, which it attributed to demographics, widening income inequality and an increase in investor demand for property.
The lower rate of home ownership by younger Australians was not, however, necessarily due to rising prices, with the share of average household income required to service a loan on a median-priced dwelling well below previous peaks and within the historical 20 per cent to 30 per cent range, the bank’s economists found.
Nevertheless, the RBA said it was time to reconsider negative gearing as part of a wholesale review of taxation, and suggested discounts on capital gains tax for property investments could be making housing more attractive for investors.
In another development today, figures showed housing investors have increased their debt levels by 10.7 per cent over the past 12 months.
That’s the fastest annual growth rate since early 2008, when turbulence in the world’s money markets would subsequently erupt into the global financial crisis later that year.
Australian housing market scales historic $6trn
Assets Su-Lin Tan
359 words
1 Aug 2015
The Australian Financial Review
AFNR
English
Australia's housing is now worth more than $6 trillion.
Surprisingly, as banks come under regulatory pressure over their exposure to housing, the debt held against the $6 trillion is only $1.3 trillion, 22 per cent of the market, property research group CoreLogic RP Data has found.
"For the first time in history since 2007, the market has touched $6 trillion," CoreLogic RP Data head of research Tim Lawless said. "We have never seen values this high.
"New investments are obviously more highly leveraged, but nearly half of the market which has had the benefit of time is debt free." Australia's debt exposure in housing is low compared with the US market, which has a 40 per cent debt to asset ratio, Mr Lawless added.
"US investors are not incentivised to pay down debt," Mr Lawless said.
The Australian market is large for its population compared with the US market, which is $16 trillion, and New Zealand at $810 billion.
Mr Lawless said the $6 trillion figure, which excludes vacant land, makes property the largest asset class among investors,similar to China, which favours property as an investment more than any other asset class.
"Household wealth is mostly in property which is why there is so much focus on the sector. Australian superannuation is about $2 trillion and the ASX share value is about $1.7 trillion," Mr Lawless said.
The value of residential properties has increased by about half a trillion dollars in the last year and since 2009, Australian dwelling values have exploded by $2 trillion.
The bulk of the market lies in NSW and Victoria, with both states experiencing the highest growth. NSW has 38 per cent of the market, $2.3 trillion, and Melbourne has $1.7 trillion, 28 per cent.
South Australia has 5 per cent of the market from 4 per cent in 2009 and Northern Territory grew to 1 per cent in 2015 from 0.2 per cent in 2009.
The remaining states have seen a reduction in their share of housing value, with the largest drop in Queensland.
Fairfax Media Management Pty Limited
Document AFNR000020150731eb810000r
Non-banks to boom as APRA clamps down
Property Clancy Yeates and Shaun Drummond
740 words
1 Aug 2015
The Australian Financial Review
AFNR
English
Non-bank lenders are bracing for a flood of loan applications from housing investors as a regulatory clampdown forces banks to tighten the screws on landlord borrowers.
As Westpac and Suncorp became the latest banks to raise interest rates for investors on Friday, the country's biggest non-bank lender, Firstmac, said it was seeing early signs of a surge in demand for property investors.
Chief financial officer James Austin cited a spike in online searches for investment loans, which he said was a "red flag" that could signal a looming wall of credit applications in response to tighter credit policies from banks.
Banks are tightening their lending to landlords and forcing borrowers to stump up bigger deposits in response to a 10 per cent a year cap on their loan growth - but less regulated non-banks have no such cap.
It came as non-bank lender Pepper Group enjoyed a bumper sharemarket float. Its stock price surged 27 per cent.
Meanwhile, it has emerged that the housing investor loan market is expanding even faster than thought. Figures show growth accelerated to 10.7 per cent a year in June after billions of dollars in loans were reclassified as investor mortgages.
The Reserve Bank on Friday revised up its credit growth figures, further exceeding the banking regulator's 10 per cent speed limit. The change occurred after ANZ Banking Group reclassified the figures it provides to the Australian Prudential Regulation Authority, lifting APRA's measure of ANZ's investor loan book by more than $20 billion.
Mr Austin said there were signs the Australian Prudential Regulation Authority's 10 per cent limit on housing investor credit growth was sending customers to seek credit outside the banks. He said visits to its website loans.com.au had jumped from 4000 to 7000 a day in the past month and Google searches for investment loans had "skyrocketed" and this was a signal people were looking for alternatives to the big banks.
"We keep expecting to see this surge in investors and we haven't seen it to date. However in the last four weeks, the surge is now coming," Mr Austin said. "That's a red flag to us that the pipeline is there and we need to take action."
On Friday, Westpac raised its variable interest rate for investors by 0.27 percentage points to 5.75 per cent.
The Australian Securities and Investments Commission this week said there were flaws in the way several lenders assessed borrowers for credit.
Mr Austin said ASIC had imposed the same restrictions on Firstmac as the banking regulator, APRA, has on banks. This includes requiring it to "stress test" every loan a borrower has to ensure they can still repay their loans at a 7 per cent interest rate.
Non-conforming lender Liberty Financial, which has a loan book of about $3.2 billion, most of which is mortgages, said two years ago 10 to 15 per cent of their new loans went to investors. That is now down to 5 per cent. But he expects that to reverse with the actions by banks because their interest rates were now back to the same level as Liberty's.
"Yes, we expect some additional inquiry really because now our rates on prime mortgages, which is about a third of our portfolio, are equal with the banks," said chief financial officer Peter Riedel.
Brett McKeon, managing director of AFG - one of the country's biggest mortgage aggregators - said most non-bank lenders have not made any move to reduce their exposure to investment loans and should see growth in applications from investors that have been turned away by banks.
"There is a definite opportunity for second-tier lenders to get more business. There is probably head room with a lot of lenders to take some extra volume, but it would then only be a matter of time before they would get rather full and be looking to re-price."
The shares of lender and loan servicer Pepper Group jumped 27 per cent above its debut price of $2.60 within hours of listing on the Australian Securities Exchange. The stock first traded at $3.05 before rising to $3.30 on Friday. Priced at 10 times forecast 2015 net profit, analysts said the price spike was due to the cheap price.
Fairfax Media Management Pty Limited
Document AFNR000020150731eb8100016
(26-07-2015, 09:08 PM)greengiraffe Wrote: [ -> ]My take - most banks are trying to slow loan demand so that they are in compliance with max investor loan growth of 10% - ie not choking off demand as widely feared by the mkts...
"The bank, which recently announced a reduction in loan-to-value ratios on investment loans to 80 per cent, has described the move as another measure to limit annual investment lending growth to a maximum of 10 per cent, as mandated by the Australian Prudential Regulation Authority."
Jul 26 2015 at 3:18 PM Updated Jul 26 2015 at 7:59 PM
Westpac tightens lending for foreign property investors
Mortgage brokers claim Westpace's clampdown is targeting the lucrative Chinese market, which that has been spending billions on residential property, particularly in Melbourne and Sydney. Paul Jeffers/Getty Images
by Duncan Hughes
Westpac Group is clamping down on lending to overseas property investors wanting to buy residential property in the nation's popular residential markets.
The bank, which recently announced a reduction in loan-to-value ratios on investment loans to 80 per cent, has described the move as another measure to limit annual investment lending growth to a maximum of 10 per cent, as mandated by the Australian Prudential Regulation Authority.
The bank's broker distribution division is writing to mortgage brokers identified as having a "higher percentage" of property lending to people not resident in Australia.
The letter does not identify the lending benchmark that triggers the review.
AUSTRALIAN ADDRESS REQUIRED
"As a result, all future home lending applications that you submit to Westpac must contain a primary application that has an Australian residential address," a leaked copy of the letter states.
That means the applicant must have an Australian visa and conform to Foreign Investment Review Board criteria. Non-residents need to obtain FIRB approval when buying property – a rule that is now being more actively enforced.
The bank could not comment on how many brokers had received the letter.
Mortgage brokers claim it is targeting the lucrative Chinese market that has been spending billions on residential property, particularly in Melbourne and Sydney.
The letter also states the review is a "timely reminder" about the bank's review and auditing procedures to ensure brokers conform to their agreement.
A spokesman for the bank said: "It's just a reminder to brokers with a higher percentage of non-resident lending that when submitting owner-occupied applications [they] should contain an Australian residential address."
PRESSURE FROM REGULATOR
Banks are rapidly changing their rules for lending to property investors, a response to pressure from the banking regulatory to reduce the amount of investor activity in the property market.
Last week ANZ Banking Group and Commonwealth Bank of Australia both lifted their lending rates for all landlords. Earlier this month Westpac announced it would require applicants for property investment loans to have a deposit equal to 20 per cent of the property's value, up from five per cent.
In addition, mortgage brokers claim competitive investment pricing has stopped.
"The rate is now the rate," said Chris Foster-Ramsay, managing director of Capital Home Loans, about Westpac no longer negotiating on investment loan rates.
Other measures aimed at reducing the demand from investors for property loans include reducing interest rate discounts, increasing interest rate "sensitivity buffers" and ruling out some types of income such as bonuses, when assessing an applicant's ability to repay a loan.
Sliding dollar attracts the big spenders to prestige property
THE AUSTRALIAN AUGUST 05, 2015 12:00AM
Samantha Hutchinson
The exclusive Mandalay at Airlie Beach, Queensland. Source: Supplied
Sydney and Melbourne’s most exclusives homes are now ranked among the world’s most expensive, and getting pricier.
Sydney’s prime residential property — which refers to the top 5 per cent of housing in a property market — is ranked third in the world for its climb during the past 12 months of 12.5 per cent, according to international property group Knight Frank.
Melbourne is also on the same sweltering growth path, rising to seventh position from 11th place in the previous quarter with prime properties appreciating almost 8 per cent in the past year.
Ultra-prestige or jumbo properties — parlance for homes that sell for more than $12m-$15m — operate under different conditions to the broader industry, in which economic conditions and currency movements are the most decisive factors.
Property executives have highlighted the Australian dollar’s 20 per cent slide in the past 12 months as the X-factor that has kicked off the prestige market’s most recent climb.
“Demand for these properties has risen in line with what's going on in other sectors of the market, but the other thing that makes a huge difference is the currency ... and that’s what I really think is working at the moment,” prestige valuer Simon Feilich said.
“We’ve seen a 20 per decline in currency and if you’re coming in from overseas, these homes are costing you a lot less to buy and that’s a huge incentive for anyone coming back to Australia from overseas, or looking to make a purchase here for the first time.”
Two Sydney listings changed hands for more than $22m each in the past fortnight, including the penthouse apartment of publican Cyril Maloney which sold for a reported $22m. Entrepreneur Duncan Saville also fared handsomely from a rising tide of interest in the market’s top rungs, netting $25m for his six-bedroom waterfront known as Loch Maree, with stone floors quarried from a 14th century French convent, and a window by renowned Australian stained glass artist Leonard French.
Melbourne is experiencing the same popularity for its tightest-held properties, with a Chinese businessman paying $25m in April for a penthouse apartment at the top of high-rise tower Australia 108.
But waiting times can be long. The Maloney apartment spent almost 18 months on the market before a sale. Another big-ticket property, Mandalay in Airlie Beach in Queensland, has been re-released to market again this month after first hitting the market 18 months ago with $25m expectations.
“We’re running very hot which is what you would expect when we’re near the top in the broader market ... but the difference is, this is going to be more of a long-term cycle, because property is a relatively small investment for the people operating at this level and they’re not often in a rush to make a decision,” Mr Feilich said.
Knight Frank research director Michelle Ciesielski believes the relative appeal of Australia among foreign investors is another decisive factor propelling prestige prices higher.
Sydney ranks third behind only Vancouver and Miami, which are two other magnets for Asian investment, and there is little sign that foreign inflows will let-up in the coming months.
Knight Frank calculates that 22 per cent of the population in China and Southeast Asia that own homes abroad have plans to buy a second home offshore this year.
Aug 4 2015 at 5:44 PM Updated Aug 4 2015 at 6:53 PM
Canada cracks affordable housing financing nut: Australia wants the same
"The most powerful tool to create affordable housing": Shayne Ramsay speaks about getting private funding into affordable housing on a panel with Carolyn Whitzman, left, Janice Abbott and Nathalie De Vries. Pat Scala
by Michael Bleby
One Canadian province has cracked the affordable housing nut by guaranteeing loans to non-profit housing providers and the Australian industry wants a similar mechanism here.
The 30-year-old BC Housing has channelled nearly $C3 billion-worth ($3.13 billion) of private sector funding to 800 community housing organisations, chief executive Shayne Ramsay said on Tuesday.
The provincial government body funds construction and then mortgages the completed buildings – covered by a federal government mortgage insurance scheme – to private sector lenders.
"When those mortgages are placed, the banks, credit unions and insurance companies are all eager for that kind of product because it comes with the federal paper attached to it," Mr Ramsay said after a panel discussion at Melbourne University. "It's probably the most powerful tool to create affordable housing next to land."
Australia is still trying to find a way to match large-scale private lending with the lower-margin, but lower-risk, affordable housing market. The need is there – the lowest-earning 40 per cent of households suffered a lack of affordable and available housing in 2013, according to the former National Housing Supply Council in 2013 and the shortfall, put at 539,000 properties two years ago, has likely worsened in the current housing boom, said Adrian Pisarski, the executive officer of National Shelter, a peak body advocating for more affordable housing.
Soaring prices have prompted aspiring owner-occupiers to rent cheaper premises to maximise their savings for a deposit, Mr Pisarski said.
THEY GET 'OUT-COMPETED'
"Because they're trying to save for a deposit, they try to rent down as low as they possibly can," he said. "That displaces low-income households from getting access to what affordable housing there is. They're basically not seen as as good an option as higher-income households in the rental market. They just get out-competed."
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Last updated: Tue Aug 04 2015 - 11:34:41 PM
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Company Profile
Provision of a range of banking and other financial services, including retail banking, mortgage distribution through third-parties, business lending, margin lending, business banking and commercial finance, invoice discounting, funds management, treasury and foreign exchange services. (Including trade finance), superannuation, financial advisory and trustee services.
www.bendigoadelaide.com.au
Banks (401010)
ASIC 068049178
ASX Announcements
3/8/15 Appendix 3B
30/7/15 Alexandra Gartmann appointed new Rural Bank CEO
8/7/15 BEN FY15 result announcement details
1/7/15 Appendix 3B
17/6/15 New - Appx 3A.1 Notification of Distribution - BENPF
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Much lending to the community housing sector is piecemeal. An aggregator that understands community housing organisations and their risks and can package loans to commercial lenders is one key to boosting supply. A separate hurdle is the transfer of housing stock from state governments to the community sector, which is better placed to manage it.
"Without a secure and reliable form of finance, affordable housing is never going to take off in Australia," said Carolyn Whitzman, a professor in urban planning at Melbourne School of Design, who spoke at the panel discussion with Mr Ramsay.
Smaller schemes exist. Community Sector Banking, a 13-year-old joint venture between Bendigo and Adelaide Bank and Community 21, a consortium of not-for-profit organisations, plays a similar intermediary role and oversees about $200 million-worth of loans made by the bank to community housing organisations.
"The demand for funding far exceeds the current supply, [just] as the demand for affordable housing stock exceeds the current supply," community sector banking chief executive Greg Peel told The Australian Financial Review on Tuesday.
Mainstream lenders would put more money into the sector if there was a public commitment to smooth the risk and return profile of lending products to the sector, he said.
"If we were going to put $3 billion, $5 billion-worth of new work into the market, it actually needs institutional investors to play a significant role," Mr Peel said. "They can play a role as long as we build solutions that would normalise their risk and yield component and in doing that, that is where government stimulus and support is required."