Skyrocketing house prices and record-low interest rates are "leading to a build-up of risk in the financial system"… REIA: Foreign buyer fee unlikely to hinder demand... Commonwealth Bank imposes a loan-to-valuation ratio…
House prices skyrocketing as regulator feels the crunch
Record low interest rates have sent Australian house prices to the moon and, according to an article in the Sydney Morning Herald, are forcing the regulator to shoulder more of the load and evolve its approach to the potential risk to the financial system.
Sydney house prices have shot up 14.9 per cent, year-on-year and 40 per cent over the last three years, while Melbourne have risen 8.5 per cent in the last year and 22 per cent over the last three, according to HSBC and RP Data. Over the last year average house prices across Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Perth and lifted 8.9 per cent, according to RP Data.
"This is leading to a build-up of risk in the financial system as asset prices rise," HSBC Chief Paul Bloxham said.
"The clearest signs of exuberance are in the Sydney and Melbourne housing markets, especially given the ramp-up in investor borrowing. While we do not think Australia has a national housing bubble, the trends in the Sydney market are unsustainable."
Credit rating agency Moody's has also warned that there is a growing likelihood of an eventual house price correction – a fall of 10 per cent from the peak – due to affordability issues and the dominance of investors.
REIA: Foreign buyer fee unlikely to hinder demand
A new federal policy to charge foreign investors $5000 for the chance to make a play for Australian real estate was not expected to put a dent on hundreds of millions of dollars worth of demand, according to an article on news.com.au.
The real estate industry has responded favourably to federal plans for a fee regime for foreign buyers – especially given the fact that the fee would apply over a six-month period, not per property. The Real Estate Institute of Australia called the policy changes ‘a win’, saying foreign investors bidding at multiple auctions would pay $5,000 to cover a six-month period of property hunting.
“We don’t expect the fee to deter the number of foreign buyers interested in Australian property, particularly those that are searching for higher priced properties. It’s important to remember why they’re interested in buying property here in the first place, for the lifestyle and access to education,” a spokeswoman for MyFun.com said.
Mortgage Choice chief executive John Flavell said those buying property equal to or higher than $1 million would pay a fee of up to $10,000, with the cost rising in increments of $10,000 for each additional $1 million added to property value.
“While this application fee may be high enough to deter some foreign investors, we do not believe it is high enough to significantly impact the current level of foreign investment activity within Australia,” Mr Flavell said.
Bankwest imposes a loan-to-valuation ratio
Non-major bank 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 from the Commonwealth Bank of Australia subsidiary.
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.
Record low interest rates have sent Australian house prices to the moon and, according to an article in the Sydney Morning Herald, are forcing the regulator to shoulder more of the load and evolve its approach to the potential risk to the financial system.
Sydney house prices have shot up 14.9 per cent, year-on-year and 40 per cent over the last three years, while Melbourne have risen 8.5 per cent in the last year and 22 per cent over the last three, according to HSBC and RP Data. Over the last year average house prices across Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Perth and lifted 8.9 per cent, according to RP Data.
"This is leading to a build-up of risk in the financial system as asset prices rise," HSBC Chief Paul Bloxham said.
"The clearest signs of exuberance are in the Sydney and Melbourne housing markets, especially given the ramp-up in investor borrowing. While we do not think Australia has a national housing bubble, the trends in the Sydney market are unsustainable."
Credit rating agency Moody's has also warned that there is a growing likelihood of an eventual house price correction – a fall of 10 per cent from the peak – due to affordability issues and the dominance of investors.
REIA: Foreign buyer fee unlikely to hinder demand
A new federal policy to charge foreign investors $5000 for the chance to make a play for Australian real estate was not expected to put a dent on hundreds of millions of dollars worth of demand, according to an article on news.com.au.
The real estate industry has responded favourably to federal plans for a fee regime for foreign buyers – especially given the fact that the fee would apply over a six-month period, not per property. The Real Estate Institute of Australia called the policy changes ‘a win’, saying foreign investors bidding at multiple auctions would pay $5,000 to cover a six-month period of property hunting.
“We don’t expect the fee to deter the number of foreign buyers interested in Australian property, particularly those that are searching for higher priced properties. It’s important to remember why they’re interested in buying property here in the first place, for the lifestyle and access to education,” a spokeswoman for MyFun.com said.
Mortgage Choice chief executive John Flavell said those buying property equal to or higher than $1 million would pay a fee of up to $10,000, with the cost rising in increments of $10,000 for each additional $1 million added to property value.
“While this application fee may be high enough to deter some foreign investors, we do not believe it is high enough to significantly impact the current level of foreign investment activity within Australia,” Mr Flavell said.
Bankwest imposes a loan-to-valuation ratio
Non-major bank 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 from the Commonwealth Bank of Australia subsidiary.
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.
