Sanity Comes to Lending as Optimism Comes to Property

Landmark decisions mean that borrowing is getting easier, just as buyers are inching back into the property market.

This week Westpac had a stunning court victory against the Australian Securities and Investments Commission on how banks should assess borrowers’ living expenses and the resultant impact on an applicant’s borrowing capacity.

Justice Perram’s judgement noted that an applicant’s living expenses had limited bearing on their living expenses on what they would spend once they have a loan.

“I may eat Wagyu beef everyday washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare.”

This decision is bound to be a significant boost of borrowing capacity – further boosting last month’s easing of assessment rates by the Australian Prudential Regulation Authority (APRA).

Australians’ borrowing capacity is no longer being strangled by regulatory hurdles – which is being reflected in the property market.  This month, the Australian Bureau of Statistics produced data which showed a spike in investor finance commitments for the first time since July 2018.

Increased lending is reflected in increased clearance rates and firmer prices.  In our two biggest market, Sydney and Melbourne, auction clearance rates are around 80 per cent – normally the sign of a sellers’ market.  Indeed, some commentators have started talking about double-digit growth.