The Royal Commission into the banking sector is likely to further tighten mortgage liquidity.
From The Real Estate Conversation.
The Royal Commission into the banking sector is likely to further tighten mortgage liquidity, said Malcolm Gunning, president of the REIA, to SCHWARTZWILLIAMS.
“The banks have been tightening their lending in anticipation of the enquiry [with APRA’s regulations]. In Sydney and Melbourne, property is coming off the boil,” he said.
The Royal Commission is likely to cause the banks to take an even more “cautious” approach, said Gunning.
Yesterday, after months of speculation, the federal government announced it will establish a Royal Commission into the “alleged misconduct” of the Australian banking and financial services sectors.
“The enquiry is important; we need a robust banking system to underpin Australia’s growth. But it shouldn’t be a witch hunt,” said Gunning.
Gunning is keen to see the enquiry address perceived conflicts of interest within the financial services industry, particularly in the superannuation sector, and applauded the government’s move to impose broader-than-expected terms of reference, covering conduct in the insurance, financial services, and banking sectors.
“I think the banks have a lot of policy where they’re providing advice on the one hand and lending on the others, and there is a blurring of lines between the businesses,” he said.
“What we should see is a clear delineation in conflicting areas of the bank, particularly for superannuation,” said Gunning.
Gunning said the Australian mortgage lending market is already facing tighter regulation and red tape.
“We’ve had about seven real estate regulations bought in over the last year, with stamp duty, first-home buyer incentives and so on, and next year there could be new money laundering regulations. Now the banking enquiry,” he said.
“That will mean our open lending market will start to tighten,” said Gunning.
Gunning said banks could get around this with greater emphases on “back door” lending.
“I think we’ll see very strong growth in the second-tier lenders,” he said.
The Commission is scheduled to run for 12 months, with its finding due to be released in February 2019. It is expected to cost $75 million.
Bank shares were weaker yesterday, but at the time of writing were staging a modest recovery.
