The Hayne Royal Commission
The Banking Royal Commission and the Housing Market
It’s very likely that the Commission’s findings, associated with some 76 core recommendations will be debated and referred to for many years, just like the GFC of 2008 the impacts may well-take a decade to work through our financial systems.
There have already been some high-profile consequences both personal and institutional, with undoubtedly more to come.
However, at an individual level and more directly focussed on the property market, it’s reasonable to ask why matters confronted by the commission are so important, and if indeed they are important to the property market, and in particular the residential sector.
The conclusion of the Hayne Royal Commission (HRC) despite the pain and the adjustments yet to come, should be counted as a positive for the residential property market. While there may not be an immediate and loud ‘sigh of relief’, the 12-month long conduct of the Commission had placed a cloud over markets causing further hesitation and uncertainty.
That’s no longer the case but governments need to respond in a constructive way and there are many reasons why that response may well continue to impact markets.
A Measured Response
A full-scale credit-crunch appears now to be unlikely however the free but responsible flow of credit to customers big and small, needs to be maintained in an open and transparent way.
Considering the flow of credit for the housing market, the HRC did not recommend any major changes to responsible lending requirements and this has alleviated concerns that more buyers would have found it harder to secure a housing loan, or other lines of credit.
This leads to considering the role and remuneration of mortgage brokers. Here there has already been a big negative response to the suggestion that in part would see borrowers having to pay a fee for broker’s services. Depending upon various published figures as many as 60% of loans are currently secured via brokers and restricting their role is not seen as a reasonable or fair idea.
However, the policy needs far more consideration and may well not be implemented as it could defy a decades long policy of shifting power away from the big four banks. The policy is perhaps better considered in a wider review of all fees and commissions (if any) paid across all financial services and just not concentrated in one area.
The housing market is also indirectly tied-up in the HRC response to several aspects of superannuation. It’s an area that is very much linked into trust and confidence as super-savings are a long-term back-stop for a majority of Australians financial futures.
Limited access to super-savings to buy a home is only a minor point, what’s key is that consumers can rely upon the fairness of fees and have confidence that their super-savings are being well managed to produce long-term financial gains and results.
This feeling of security will in the longer-term feed into the stability of the housing market and wider economy.
A Cultural Resetting Cause for Confidence
The hope is that the HRC will lead to a cultural resetting of the entire Australian financial sector, if that happens it will be, a positive outcome for the wider economy and that includes the property sector.
Avoidance of any sort of tighter credit-crunch is important as a weaker property sector will impact employment, investment and productivity and could then course in a negative way through the entire economy.
Despite the HRC being a huge shockwave to the financial sector if fundamentally there is change to many key aspects of culture, management and governance that has a focus on consumers then the HRC should be a positive for the property market.
There’s already been a positive share market rebound but the real work is yet to come, and a determined eye will be on the Federal Government and the Opposition leading into the federal election. Consumers will look for government to act, but to do so fairly and with due consideration, so we can see trust and confidence are restored.