May Director's Desk - Financial tug of war.
Friday 13 May 2016
There is an interesting scenario currently taking place behind the scenes in the property market. Interest rates are at a record low and yet access to finance is increasingly hard to secure. The RBA decision to cut rates is being countered by the APRA changes around how banks can lend money for mortgages. It is like a tug-of war. So who will win?
It is nearly a year since APRA changed the rules around capital management against mortgages for the banking sector and it is increasingly clear those changes are starting to bite into the property market.
Our team is finding that foreign buyers in particular are not able to access domestic finance as easily as they have in the past. I find it fascinating that for all the legislative oversight introduced in a bid to curb the impact of foreign buyers on the residential property market it is a relatively simple change in banking requirements that has had the most impact.
So while the RBA decision to drop rates last week to the record low of 1.75 percent represents a very positive move for the residential property market the strengthening grip of the APRA requirements is pulling in the opposite direction by limiting a key segment of the property buying market.
I think it is too soon to determine exactly how it will all pan out.
As I have said in my blog the market continues to deliver good results for vendors. It seems many potential vendors remain nervous about the state of the market but in reality right now consistently great results are being achieved because of a lack of sufficient stock to meet buyer demand.