Billionaire apartment developer Harry Triguboff has warned this year could be worse than 2018 for Sydney and Melbourne’s already battered housing markets.
The Meriton founder called for easing of taxes to coax foreign buyers back into the market and for young people to be able to access their superannuation to buy a home.
“It may be as bad as last year, it may be worse,” he told The Australian. “Australia is completely dependent on the Chinese (buyers). (The slowdown) must affect the broader economy.”
Mr Triguboff added that number of borrowers in negative equity was growing, but banks so far were not calling in loans. “And people are paying,” he told the paper. “In some ways the banks are doing a good job — they are not sending people to the wall.”
Sydney and Melbourne’s house prices have fallen about 10 per cent from their 2017 highs and most economists have revised their forecasts downward ahead of the release of the banking royal commission’s final report on Monday.
AMP Capital chief economist Shane Oliver last week said he thought prices would fall another 15 per cent this year for a total top-to-bottom decline of 25 per cent, up from 20 per cent previously.
“Tight credit, rising supply and falling price expectations are the main negatives,” he said in a client note. “Uncertainty around the impact of possible tax changes is likely also impacting investor demand.”
Other analysts including property research firm CoreLogic and a number of investment banks are predicting total falls of 15-20 per cent, but Douglas Orr from Endeavour Equity Strategy is tipping 30 per cent, which would make it the worst downturn since 1890.
Mr Orr’s analysis is based on the revelation from the banking royal commission that almost all mortgages written between 2012 and 2016 had used the controversial HEM benchmark to over-assess borrowing capacity.
The HEM, or Household Expenditure Measure, is a tool used by banks to determine whether customers can afford to pay off a loan. It has been criticised for vastly underestimating living expenses, potentially leaving borrowers struggling to make their repayments.
Mr Orr said the widespread use of the HEM had resulted in billions of dollars of unaffordable loans being extended that would take years to work through the system and could lead to rising defaults.
“The size of the credit crunch is directly proportional to the unreasonableness of the HEM expenses benchmark,” he said in a client note, reported by The Australian Financial Review.
“Since HEM expenses are very unreasonably low, the credit crunch will be significant and ongoing as it is increasingly replaced with reasonable expenses.”
In November, ANZ chief executive Shayne Elliott told the banking royal commission that staff had taken “shortcuts” and the bank “didn’t ask enough questions”, but said reliance on the HEM was “now in the mid-50s and continues to trend down”.