Post to SinFongChanRE.Wixsite.com on 8/5/2018 2:20 AM
Commenting on “Credit availability and impact on property prices”
Many economists talk about supply and demand of commodities in a market. Speaking more specifically, the commodity in question is property, and the market is the real estate. If there are many properties for sale, the price will go down. Unfortunately, it was not the case as history revealed in the past few years. So, what can bring the price down?
It is a matter of buyers' perception. Loaded foreign buyers, especially those from mainland China, were able to splash their money buying up properties because the property prices were considered low, and good value for money when compared those back home. During the past few years, these foreign buyers were able to channel their money out of their country without much interference by their government. Compounding this was that Australian government, as usual, was not quick enough to recognise the dilemma and respond accordingly.
Prices kept rising because the foreign money supply was there. Unfortunately, many local buyers feared of losing out, jumped in to join the bandwagon, and paid unrealistically high price.
With the stroke of the pen, Chinese government curb the outflow of money, and targeted those laundering money which did not legally belong to them. Australian government soon woke up and declared amnesty to those illegally owned and bought properties in Australia, and later tightened the laws further which enable the authority to prosecute the offenders.
Foreign Investment Review Board (FIRB) was once a toothless tiger. After December 2016, ATO has taken over full responsibility for residential real estate purchases by foreign citizens. New civil penalties were introduced at the same time for investors found to be in breach of the foreign investment regulations.
The present phenomenon does not follow the normal supply-and-demand curve behaviour. It is NOT the excess supply of properties for sale that brings the prices down; the increased housing stock supply is the effect of lack of credit availability.
Credit is getting extremely difficult to get, and for many who show no loyalty to any lending institution before, may find their application not being favourably looked at. There are ways you can be seen as loyal by several banks - keep moving your money around the banks regularly without running the balance dry.
Some borrowers reckon that the lending institutions are looking at how they spend their money, to ensure they are able to repay in future. The lending institutions are taking less risks than before, especially the Royal Commission of the Banking Industry has pulled the banking practices back in line, making sure the unethical tactic used is weeded out.
Thank you for reading.
Commenting on “Credit availability and impact on property prices”
Many economists talk about supply and demand of commodities in a market. Speaking more specifically, the commodity in question is property, and the market is the real estate. If there are many properties for sale, the price will go down. Unfortunately, it was not the case as history revealed in the past few years. So, what can bring the price down?
It is a matter of buyers' perception. Loaded foreign buyers, especially those from mainland China, were able to splash their money buying up properties because the property prices were considered low, and good value for money when compared those back home. During the past few years, these foreign buyers were able to channel their money out of their country without much interference by their government. Compounding this was that Australian government, as usual, was not quick enough to recognise the dilemma and respond accordingly.
Prices kept rising because the foreign money supply was there. Unfortunately, many local buyers feared of losing out, jumped in to join the bandwagon, and paid unrealistically high price.
With the stroke of the pen, Chinese government curb the outflow of money, and targeted those laundering money which did not legally belong to them. Australian government soon woke up and declared amnesty to those illegally owned and bought properties in Australia, and later tightened the laws further which enable the authority to prosecute the offenders.
Foreign Investment Review Board (FIRB) was once a toothless tiger. After December 2016, ATO has taken over full responsibility for residential real estate purchases by foreign citizens. New civil penalties were introduced at the same time for investors found to be in breach of the foreign investment regulations.
The present phenomenon does not follow the normal supply-and-demand curve behaviour. It is NOT the excess supply of properties for sale that brings the prices down; the increased housing stock supply is the effect of lack of credit availability.
Credit is getting extremely difficult to get, and for many who show no loyalty to any lending institution before, may find their application not being favourably looked at. There are ways you can be seen as loyal by several banks - keep moving your money around the banks regularly without running the balance dry.
Some borrowers reckon that the lending institutions are looking at how they spend their money, to ensure they are able to repay in future. The lending institutions are taking less risks than before, especially the Royal Commission of the Banking Industry has pulled the banking practices back in line, making sure the unethical tactic used is weeded out.
Thank you for reading.
