Hilton Parkes Real Estate
9th February 2019

Experts Tip RBA Rate Cut Soon 
The Reserve Bank of Australia kept the official interest on hold this week but a reduction in the cash rate seems more likely now than it has in years, according to comparison site Finder. All 28 experts in Finder’s RBA cash rate survey correctly predicted that the RBA would hold at 1.50% on Tuesday, but their predictions have changed dramatically about the direction of the next RBA move.
For the past two years, about 80% of experts have predicted an increase as the next cash rate move by the RBA. But this month, only 11 of the 28 experts did so. Stephen Koukoulas, managing director at Market Economics, says he could see a change happen as soon as next month. “The RBA will acknowledge the economy is weaker than when it last met and will signal a change in bias towards an easing,” he says. Graham Cooke, insights manager at Finder, says the panellists who put a date on their rate drop predictions were evenly spread from March to November.

Big City Prices Still Up 40 – 50%
CommSec chief economist Craig James says prices in Sydney and Melbourne remain 40-50% higher than the levels of 2012, despite recent falls. James says prices in the two biggest cities are retreating to “fair value” but just where that lies for home prices “remains to be seen”. James notes that Sydney and Melbourne’s home prices are still well above the August 2012 lows. Sydney dwelling prices are up 50% from their August 2012 levels, while Melbourne prices are 44% higher. “The good news in the NSW and Victorian markets is that the unwinding of unsustainably high prices is occurring at a time when job markets are in the best shape in 40 years,” James says. CommSec says that, meanwhile, Hobart is up 40%, Canberra is up 23% and Brisbane and Adelaide’s prices are both up by around 20%. Perth and Darwin prices have been hit by the ending of the resources boom over this period, James says.

Loans To Cost More, Says Broker

Australia’s mortgage broking industry has criticised the Banking Royal Commission report, saying a move to overhaul how brokers are paid will make loans more expensive by entrenching the power of major lenders. The Finance Brokers Association of Australia says the Royal Commission had fundamentally failed to understand the role mortgage brokers play and the competitiveness they bring to the home loan market. The sector, which accounts for 60% of all home loans, is gearing up to fight a key recommendation in the final report from Kenneth Hayne: that borrowers, not lenders, should pay brokers. “Hayne wants to hand even more power to the big banks and eliminate competition, which is a ridiculous scenario and shows just how out of touch he is when it comes to brokers,” Finance Brokers Association managing director Peter White says. “We know that most borrowers wouldn’t pay and banks would make more money and standards would drop further.”

Most Buyers Use Brokers

The Banking Royal Commission report proves that even within regulated environments lawlessness can be rife, says Property Investment Professionals of Australia. PIPA chairman Peter Koulizos says the many examples of criminal activity in the financial services sector was a sign of what happens when money is more important than client outcomes. “The report suggests many in the sector were motivated by greed rather than acting in their client’s best interests,” he says. “However, such a blanket statement does a disservice to the majority of honest employees working in the industry. “Mortgage brokers, for example, create much-needed competition and deserve to be paid for their service, so we’re pleased the Federal Government has questioned the recommendation that commissions be paid by consumers rather than banks.” The PIPA Investor Sentiment Survey found 75% of investors secured their last investment loan through a mortgage broker and 86% intend to finance their next loan through a broker.

Westpac Boss Rejects Blame

Westpac chief executive Brian Hartzer has rejected claims that the Big Four banks are worsening the housing price slump in Sydney and Melbourne by cutting off credit. “Let’s be clear: we want to lend,” Hartzer says in his opinion column in the Australian Financial Review. “For Westpac, the recent decline in credit growth was due entirely to a reduction in new applications. Average approved loans sizes actually increased slightly, while our approval rates remained unchanged “As to the perception that the Royal Commission has made banks scared to lend, for Westpac this is simply not the case.” Hartzer does suggest, however, that the increase in scrutiny of customers’ expenses and income,has added to the time and cost of getting a loan. “My view is that the housing market remains fundamentally sound and, overall, the adjustments are nothing to be alarmed about,” he says. Hartzer says the price falls in Sydney and Melbourne need to be seen in the context of a 75% jump in Sydney prices between 2011 and 2017, and a 55% rise in Melbourne.

Quote Of The Week 
“Commissioner Hayne wants to hand even more power to the big banks and eliminate competition, which is a ridiculous scenario and shows just how out of touch he is when it comes to brokers. We know that most borrowers wouldn’t pay and banks would make more money and standards would drop further.” 

Finance Brokers Association managing director Peter White