Housing slowdown lingers

Uncertain times for lenders as market stays flat

AUSTRALIA’S housing market slowdown is likely to continue this year, with property transaction volumes dropping as much as 5 per cent, according to a survey of lenders and brokers.

Deloitte’s annual Mortgage Report says 2018 already seems likely to be a second consecutive year of flat or lower settlement volumes.

Deloitte financial services partner James Hickey (pictured) says uncertainty around possible new rules and legislative change as a result of the ongoing banking royal commission could dampen the market, but he characterises the slowdown as a healthy pullback from unsustainable levels of recent years.

“When placed into perspective, the strong lending growth of the 2013 to 2016 period was never going to be sustainable in the long term,” Mr Hickey said.

“The market recognises the need to take stock and find a new sustainable base for the long term.”

Regulatory attention from APRA and ASIC could act as handbrakes on the market beyond 2018, with lenders obliged to undertake more thorough checks on customers’ circumstances and more detailed explanations about their loans.

Deloitte financial services partner Heather Baister said banks and brokers are already looking into ways of addressing transparency and accountability issues around mortgage lending.

“In the future, lenders will have to consider how they can demonstrate that the customer has a true understanding of their product,” Ms Baister said.

“This will mean a more thorough assessment process, tailored to individual customers and their understanding of the loan; this will inevitably slow market growth.”

However, the resulting competition between lenders may open the door for more first-time buyers and owner-occupiers.

Deloitte Access Economics director Michael Thomas said Australia’s residential market was still largely supported by solid underlying demand.

“Taken together with the outlook for interest rates, slowing house price growth moderating the prospect of further capital gains, (and) restrictions on lending such as on interestonly loans and loans to investors as well as to lending to foreign investors, we expect a period of moderation rather than an abrupt adjustment,” Mr Thomas said.