The pressure on the Australian property investment market is “unsustainable” and could see some players face significant losses, according to Empower Wealth founder and chair of the Property Investment Professionals of Australia Ben Kingsley.
“Everyone's in the property space at the moment, and to be honest with you, it’s absolutely unsustainable,” Mr Kingsley told Mortgage Business’ sister title, The Adviser, warning against a scenario where more than half of overall lending is taken up by property investment.
“I think January's number was 57 per cent of all New South Wales lending [being] investment again,” he said. ‘That's scary territory. I mean, there are people who are going to lose money when it comes to property investment.”
Noting that these casualties might well be focused on the top end of town, Mr Kingsley said they could be “Board-less investors and looking to invest in, say, Queensland or somewhere else; good luck where they are.”
He also argued the point that it was wholly unrealistic to assume that everyone could be made a short-term winner in the current property investment sector.
“I think we'll see a bit of this ebb and flow, and to be honest with you, I think there's going to be some carnage out there in probably three or four years,” he added.
However, Mr Kingsley said that while the outlook seemed rosy enough, the market would invariably be repleted with many takers trying to make hay. “But I think if you stick to your fundamentals and if you've got a good business, you should be able to ride through this,” he concluded.
In terms of the more political aspects linked to the high-profile property bubble, Mr Kingsley sounded a note of warning around potentially recessionary moves being contemplated in some quarters of the Canberra beltway.
He said the housing affordability issue remained a serious challenge in many overseas and domestic markets.
“It's something that is not solved in any major cities around the world, and they don't have negative gearing, so don't blame the investor,” he emphasised.
“Politically, it's a hot potato that gets Labor and the Greens a little bit of traction, [but] we've got to do the right thing to make sure the message is out there, in terms of: ‘We're open to reviews of all taxation and all of that, but don't just try and bring one element of market manipulation in, because you just don't understand the consequences of what you're doing for the long-term viability of direct and indirect employment’."
Finally, Mr Kingsley flagged the importance of the economy and wealth of the nation being underpinned by residential property. “So [if] you start trying to manipulate that to get 10 or 15 per cent of the people into the market, you don't really know where that's going,” he warned.
“I think if you look at all Treasury estimates and forecasting on that space seriously, they've all come back and said, ‘We really don't know what will happen’."
“If you want to start doing that, you're playing with a recessionary lever in my view,” he said.
Mr Kingsley's comments were made ahead of APRA's recent crackdown on investment lending (in particular, interest-only lending), which limits the flow of new interest-only lending to 30 per cent of total new residential mortgage lending.