Trending Financial News 3 December

Home prices surge higher in November

National property prices rose strongly in November according to CoreLogic’s Home Value Index. 

The Index jumped up 1.7 per cent over the month, the fifth consecutive month of national price rises in residential property.

Sydney and Melbourne property markets led the way with home values up by 2.7 per cent and 2.2 per cent respectively. Other capital cities, except Darwin, also saw values rise over November.

“A 75-basis points rate cut from the Reserve Bank, a loosening in loan serviceability policy from APRA, and the removal of uncertainty around taxation reform following the federal election outcome, are central to this recovery,” said Tim Lawless from CoreLogic.

Property market back in the black

Average Australian home prices jumped up in November in the biggest monthly rise for 16 years, according to data from CoreLogic. Buyers are being encouraged to spend by low interest rates said Time Lawless from CoreLogic.

“Advertised stock levels are persistently low, creating a sense of urgency in the market as buyer demand picks up.

“There’s also the prospect that interest rates are likely to fall further over the coming months and an improvement in housing affordability following the recent downturn are other factors supporting a lift in values.”

Property price rises may not be sustainable

National average residential property prices surged higher in November, for the fifth month in a row according to CoreLogic.

However the “unexpected period of rapid recovery” may not be sustainable, according to Tim Lawless from CoreLogic.

“Considering wages and household income growth remains low, economic conditions are losing momentum and housing affordability is once again worsening from an already high base in the largest cities, there are likely to be some headwinds in maintaining such a fast recovery.”

Low supply is also sustaining demand said Mr Lawless. 

Westpac gives investors an out

Westpac is letting investors who signed up to buy new shares as part of its $2.5 billion share issue withdraw from the program. Westpac has been rocked by allegations of 23 million breaches of money laundering laws.

Westpac’s share price has plummeted over the last month from almost $28 to around $24.50 now.

Westpac announced retail investors who applied for shares before Australia’s financial intelligence watchdog sued the bank on November 20 can opt out of the share issue.

Westpac already sold $2 billion in shares to institutional investors for a discounted price of $25.32 before the legal action was announced.

Bank profits trending down

Bank, finance and insurance profits fell 28 per cent over the September 2019 quarter from the June quarter according to data from the Australian Bureau of Ststistics. The finance sectors profits are now half what they were in 2017.

Chair of banking industry watchdog APRA, Wayne Byers, said banks need to keep more of their income. Byres told a parliamentary committee that big banks too readily paid high dividends and this could lead to underinvestment in compliance and risk management systems.

“There will be much harsher choices for bank boards to make about how much of their reduced returns they need to retain to grow their balance sheets and fund balance sheet growth, and how much they can afford to return to shareholders,”

Chart from BankingDay.com

Regulator considers tough action against Westpac

Westpac’s alleged breaches of money laundering laws could see it face more than one huge penalty. Chair of APRA, the banking industry regulator, Wayne Byers, told a parliamentary committee yesterday that:

“These are very serious allegations [against Westpac] which have caused us, as the prudential regulator focused on the financial safety of institutions and the system, to carefully consider what they mean for the prudential standing of Australia’s second largest bank.

“The bank is financially strong, but the Austrac matter has raised issues of governance, culture and accountability.

“We are actively considering what further action by APRA is required.”

Government under pressure to rein in loan sharks and pawn brokers

Small personal loan providers face new laws to curb extreme high rates and costs that trap low income borrowers into “debt spirals.”

The Centre Alliance Party has introduced bills in the House of Representatives and Senate mirroring legislation to regulate the small amount credit contract market the government drafted in 2017 but never acted on.

Centre Alliance has gained the support of the Labor Party and yesterday’s bill was co-sponsored by Labor Senator Jenny McAllister.

Pawn brokers and small personal loan providers face new rules

The Centre Alliance Party has introduced bills in the House of Representatives and Senate to  introduce a cap on total payments made under a consumer lease and require small amount credit contracts to have equal repayments, equal payment intervals and no residual monthly fees where a consumer repays the loan early.

The new proposed laws ban door-to-door selling by lenders and they strengthen penalties.

The new proposed laws reduce the maximum amount of a Centrelink recipient’s earnings that can be used for each repayment from 20 per cent to 10 per cent.

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