The long-awaited final report from the banking Royal Commission has been handed down. Despite some of the alarmist media coverage that surrounded its outcome, and the impact on the property industry, the report is unlikely to have a direct impact on property prices. There're a few reasons why.
Firstly, now that the report is released, certainty will increase across institutions providing credit approvals. Since the report was commissioned, there have been extremely conservative lending policies put in place which have prevented people from borrowing and buying. Given the final report placed no further lending restrictions on the banks, some of these policies may soften, meaning people will have the confidence and ability to borrow again.
Secondly, consumer sentiment and expectations have played into property prices in recent months and negative media coverage has a role in this. With the report delivered, the coverage should soften. This offers an opportunity for our industry to refocus on offering superior customer service to rebuild confidence in our clients.
With the positive, there are some factors which will need to play out in the market before we can be clear on the impact;
Lending due diligence – There are still strict enforcements of existing lending laws being placed on lenders and more power has been given to APRA and ASIC to intervene. Extensive due diligence around lending applicants might mean a high number of people are being refused loans, even if they can repay them.
Mortgage brokers – The report recommends broker commissions be abolished and instead, a fee be paid upfront. While on the surface this sounds reasonable, it could result in less competition in the market. Consumers may choose to head to one of the big four banks first (who don't charge an upfront fee), rather than using a mortgage broker at all.
With the federal election looming, we will need to wait and watch carefully in terms of what the government does with the recommendations and how they play out across the year.