Welcome to my ponderings….
These past weeks the banking sector is in the limelight for a number of misdemeanors and to quote former ACCC chairman Allan Fels:
“The banking royal commission has revealed more systemic, shocking and unconscionable behaviour than could have been predicted and corporate watchdog ASIC may have grown “too close” to the financial sector”
Click Here for the full article very interesting:
Aside from cleaning up the apparent widespread and unconscionable behaviours, the changes to the banking sector will have many outcomes and they could very well be tighter lending and higher interest rates. (Presently they are saying rates will hold until 2019 and no real appreciable change till 2020 but hold onto our collective hats – they have been known to flip at any time – can’t help but cast back to Dec 1979 at around 9% to peak at 17% in 1989 – everyone doubts they will ever get to those dizzy heights again?)
The impact can be tighter lending making it more difficult for tenants to break the rental “trap” thus putting upward pressure on rental demand, increase in weekly rent rates and eventually an increase in sales price as investors come back into the market aggressively.
The other side of the same coin can also mean that demand for homes drop due to people’s inability to get finance. As a result, things are likely to change this year and as always, for some the better and others the worse.
Imagine what might happen if because of increased demand, tenants won’t be able to pay the higher rents and if they can’t pay higher rents then sale prices might take a downward direction in investment properties with a possible impact directly on the sale price of your property as a result.
It would appear then that cleaning up the banking sector could be a double-edged sword.
Further to those implications, the REIA (Real Estate Institute Australia), as shared to me by a colleague in North Queensland, has also made a submission to the Royal Commission.
It has to do with ads you might have noticed offering a service to find you the best agent.
Here is an excerpt from what the REIA said:
“REIA says agent selection services do not work the way many vendors think they do” and calls for transparency. In a submission to the Royal Commission into Misconduct in the Banking Industry, the President of the REIA, Malcolm Gunning, said that services promising to choose real estate agents for vendors have proliferated. They believe the way selection services operate may constitute a conflict of interest.
Mr Gunning said, “These businesses portray themselves as in impartial consumer advocate offering a free service to choose the most suitable agent for marketing their property”
“On the surface this appears very attractive, the reality is however, very different. Only those agents who are registered or are, in some way associated with the selection service, will be referred to the vendor. The agent selection service is nothing more than a listing service for agents who subscribe to the service”
Knowing of other similar services, it is highly likely that those agents pay a fee to be registered with the banks services just as the REIA submission implies.
Already not a chosen method by us because of the potential conflicts of interest, I was a bit gobsmacked to find that the banks are also into those sorts of arrangements.
So, it would appear the market place is in for some serious changes this year because of apparent bank practices and whether proved implicitly or not, the shadow surrounding it all will have fallout in any event.
For me the lesson would be to watch out very carefully for any referral/selection process that recommends an agent you may or may not choose – it could cost you tens of thousands of dollars.
And, to keep a close eye on the proceedings, utilise mortgage brokers more often for lending. For the ones I know of, their interest is in finding you the best deal.
Just like any good real estate agent, they ought to always hold your best interest at heart and dealing via third parties can be a rickety bridge over already troubled waters.
Until next time, Happy Lending Listing Selling and Buying….