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Banking Royal Commission vs Time. What does that mean for you as a Property Investor?

Banking Royal Commission vs Time. What does that mean for you as a Property Investor?

The royal commission into banking has been received with mixed feelings. The banks have already jolted the property market with a self-imposed crackdown on lending. Some property investors have already been impacted by this, not being able to tap into new funding or being restricted with the amount of money the banks will actually lend.

But the final report of the Royal Commission will not spark a further credit crunch, according to economists.

Since the Royal Commission began, the Big 4 of the Australian Banks have been under the spotlight and constant scrutiny. This had a positive effect on the banks, as they began cracking down on borrowers’ living expenses in assessing their ability to repay loans. “Servicing” a mortgage, became the dominant spectrum.

AMP Capital chief economist Shane Oliver has already stated that the final report showed that the Royal Commission was “not pointing to any further tightening”. “The focus going forward will be making sure these regulations are maintained” he added.

Property prices in Sydney peaked in mid 2017 and have been on a downward trajectory since, falling almost 10 percent in Sydney and more than 8 percent in Melbourne, since the Royal Commission began. Economist Terry Rawnsley of SGS Economics agreed there wouldn’t be a further “belt tightening” as the big banks have already pre-emptively made changes to their lending practices in the lead up to the final report”.

Overall, a fair and competitive playing field will be the expectation between lenders and borrowers.

Any property investor will agree that investing in properties is not a short term project. Yes, location and timing and so many other variables come into play when choosing which property to invest in, but the facts are still there. If you plot a timeline and then reflect on the median pricing of properties in that particular area, what trend do you see? Regardless of what media outlets focus on, regardless of opinions are thrown at you, regardless of all the predictions. There is one real question that can be answered. Has property increased over time?

From 2010 – 2019: With the 2008 financial crises and the current property price adjustments, is your property worth more now compared to the date of 01/01/2010?

From 2000 – 2009: With stagnant growth that lasted years at what end of the scale is higher? 01/01/2000 or 01/01/2009?

I can keep on going.

Time has spoken for itself and has proven that with time, the median property price has increased.

If you would like to speak to us in regards to Property Investing or have any question pertaining to your own investments, speak to M1 Properties. We are the specialists in the industry and are custom built and fortified about everything to do with Property & Building Management.

James Merheb

M1 Properties Managing Director & LREA

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