RBA acknowledges speculation driving demand in housing market, calls for close observation
"For investors in housing, the pick-up in housing credit growth had been more pronounced than for owner-occupiers, with investor demand particularly strong in Sydney and to a less extent in Melbourne," the Reserve Bank of Australia said in minutes from the 2 Sep meeting released Tuesday. "Members further observed that additional speculative demand could amplify the property price cycle and increase the potential for property prices to fall later," it added. There's no specific call for increasing bank reserves or curtailing lending – it's more of a dirge penned ahead of the fall to come. Banks will be fine when prices drop, the RBA said. “The main risks in such a scenario would likely be to the stability of the macroeconomy rather than the financial system, particularly if households were to react to declines in their wealth by cutting back on their spending." Read the full story here.
Ray White is getting into the financial planning business
Real estate megafirm Ray White will take out an Australian Financial Services Licence, turning its network of 750 real estate agencies and 500 mortgage origination brokers across Australia into a network of financial planners. Ray White's extension into planning will be called Wealth Market, and it has immediately raised questions about conflicts of interest if and when its mortgage brokers start looking for value in other parts of their clients' portfolios. Most of Ray White's business is commission based, which isn't always the best way to serve a financial planning client. Read the full story here.
Liberal committee chair demands real enforcement of foreign purchasing rules
It's fine for foreign investors to buy new properties, but a fine for those investors if they buy established properties. That's the rule Kelly O'Dwyer, chair of the House of Representatives Economics Standing Committee, wants enforced. The Foreign Investment Review Board (FIRB) has prosecuted no one since at least 2007 for breaking the foreign investment law, nor has it required divestment from any foreign buyer since 2006, despite mounting evidence that some buyers have flouted the rules. "I think there has been a failure of leadership in FIRB,” she said. “I think that they have not been proactive in the way that they have gone about their role.” Read the full story here.
Hockey: Bubble? There's no bubble
Blame supply. Federal Treasurer Joe Hockey says there are too many buyers chasing too few houses, and that's what's driving prices through the roof, calling conclusions of a price bubble “lazy”. Speaking at a seminar in Sydney on Tuesday, Hockey downplayed the role of easier credit in the price run-up, given the amount of cash buying houses. A surge in new dwelling construction in Sydney, Melbourne and – now – Brisbane may moderate growth, he said. But "Australia fundamentally doesn't produce enough houses to meet demand," the Treasurer added. Read the full story here.
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