It’s a story I would not have predicted and it’s all good. There has been so many changes affecting our market since May this year.
First an election win to the coalition. This gave investors’ confidence that negative gearing would continue and the issue of changes to capital gains tax was off the table.
Then we have had two cuts to official interest rates and banks have been willing to pass part of this on.
Australian Prudential Regulation Authority (APRA) has loosened its guidelines for banks with respect to affordability by easing assessment rates.
And now Westpac have had a stunning court victory against the Australian Securities and Investments Commission on how banks should assess borrowers’ living expenses and the resultant impact on an applicant’s borrowing capacity.
Justice Perram’s judgement noted that an applicant’s living expenses prior to taking a loan, had limited bearing on their living expenses once they committed to a loan.
“I may eat Wagyu beef everyday washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare.”
This decision will be a significant boost to borrowing capacity and together with the other recent changes should liven up our market.
Buyers borrowing capacity are no longer being strangled by regulatory obstacles – which is starting to show in the property market. This month, the Australian Bureau of Statistics produced data which showed a spike in investor finance commitments for the first time since July 2018.
Increased lending is reflected in increased clearance rates and firmer prices. Our offices in the two biggest markets, Sydney and Melbourne, are reporting auction clearance rates are around 80 per cent – we would hope some of these changes and the optimism in the south would influence our market.