It’s harder to get a loan in Australia right now than it has been for years. The Royal Commission on Financial Services and Media have been forcibly grabbed by big banks for lax lending standards. And it seems they take note of it.
Figures from the Australian Prudential Regulator show that new loan growth is slowing from 6.6 percent a year ago to 5.8 percent earlier this year.This is due to a few factors, including severe repression of investor loans, the abandonment of high risk loans, and increased paperwork controls for all borrowers.
In practice, this means that some potential buyers are struggling to finance themselves.
“It’s like I have a criminal record”
Paula Mills runs the Entrepreneurs Academy in Sydney. It employs 15 people full-time and has hundreds of thousands of euros in the bank.
She said that although her financial situation was “very healthy”, she could not get the bank to extend her mortgage. “It’s very frustrating, the first time I applied for a loan, I was probably earning a quarter of what I earn now and they approved it in a few days,” she said.
“This time, we have been exchanging ideas for two months and visited six to eight banks. “The amount of paperwork is just ridiculous, it’s so pervasive, it’s like I have a criminal record.”
“Absolutely, there is a credit crunch,” says a real estate institute
Real estate agents across the country are seeing the impact of the crackdown on credit in silent auctions and open houses. “Absolutely, there is a credit crunch across the country,” said Malcolm Gunning, president of the Real Estate Institute of Australia. “The royal commission really uncovered some problems in the lending policies of the banks, so the banks reacted and took a more conservative approach.”
While buyers are struggling to finance themselves, prices are falling, he said. “We are going to see a drop in prices in Sydney and Melbourne, around 10% at this point, and it could go a little further south.”
The ‘alarmist’ accident speech, says NAB
Alan Oster, chief economist of the National Australia Bank, however, dismissed any discussion on a sharp drop in property prices. In his opinion released last week, he predicted a 6.5% drop in Sydney and 2.5% in Melbourne.
“I think it’s alarmist to say you’re going to have a sharp drop in real estate prices,” he said. Oster said the market slowdown was due to changes in regulations limiting lending to investors, as well as stricter controls on borrowers.
“I think one of the issues that worries people is how well the banks have understood your income and your ability to repay a loan,” he said.
“So, the banks will now say,” Okay, we really want to see a copy of your payslip, we’re not going to use an automatic system. ” He added that the type of people who could borrow money was also changing due to regulatory repression.
“The investor market is down and the homeowner is up, so there has been a change.”