Bargains set to hit the market in wake of royal commission

Peter Maloney, CEO of GlobalX, said the banking royal commission would have an impact on property prices in a number of ways, with the most probable being a further tightening of credit policies from banks.

However, this impact will not be felt until at least months after the royal commission releases its findings, and potentially even years later, he said.

“However, we can say that it’s important be aware that if you are purchasing or selling a property, you are likely to be indirectly impacted by the royal commission, even if you are aren’t directly affected by changes to lending practices or laws,” Mr Maloney said.

“We are already seeing the effects of tighter credit with national housing prices falling by 4.6 per cent, with Australia’s two largest cities experiencing the biggest falls,” Mr Maloney said.

“Lenders are being urged by the Australian Prudential Regulation Authority (APRA) to closely investigate all loan applications, essentially causing a backlog of prospective home buyers.”

Mr Maloney said before the royal commission, banks would typically use the household expenditure measure to determine if borrows could pay back a loan. As a result of the royal commission, the accuracy of the household expenditure measure has been questioned, and loans have been given out to people who may not be able to repay them.

Because of these concerns, Mr Maloney said banks are changing their lending policies and increasing the already placed restrictions on lending.

“More restrictions, and higher thresholds for loan to valuation ratios, translate to more buyers being able to borrow less, or not borrow at all, in comparison to a few years ago when they may have been able to take on significant loans,” he said.

“With fewer buyers in the market, there are fewer properties being sold and less demand for properties; therefore, the supply and demand balance is tipped in favour of buyers, rather than vendors.

“Australia is currently experiencing one of the largest crashes in the volume of houses and units available for sale, and some economists are going as far as saying that the commission could result in the worst housing bust we have seen in decades.”

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