Investors ‘ready to go’ with certainty restored

Founder and CEO of Empower Wealth Ben Kingsley has told Mortgage Business that the rejection of the Labor opposition’s proposed changes to negative gearing and the capital gains tax (CGT) has restored confidence in the property investment space.

Mr Kingsley revealed that he’s already experienced a rise in enquiries from investors since the announcement of the Coalition’s electoral victory. 

“I can tell you that just in the last 48 hours, the phone's been ringing, people now have some level of [certainty] around what to do,” he said.

“Four people contacted me personally yesterday saying, 'I'm ready to go'.”

The Empower Wealth CEO added that the absence of policy or regulatory constraints would likely spur an increase in market activity from both owner-occupiers and investors.  

“There's continuity on the federal level of politics, there are fewer risks, and no macro-intervention in the property space,” he said.

“I think that's a real positive for people around the decisions that they're going to make from both an owner-occupier and investor point of view. 

“I'm quietly optimistic that we will see a bounce.”

Mr Kingsley, who also serves as chair of the Property Investors Council of Australia (PICA) also joined several property and finance industry stakeholders in welcoming the Australian Prudential Regulation Authority’s (APRA) proposal to remove its interest rate floor of 7 per cent and increase its interest rate buffer from 2 per cent to 2.5 per cent.

“I'm really pleased that APRA is listening to the industry and that they understand the systemic risk is now passed and that we're going to see lower interest rates for longer,” Mr Kingsley said.

“It was bordering on ridiculous in having that high assessment rate, which was limiting investment from both owner-occupiers and investors in property and lending.”

CEO of the Property Council of Australia Ken Morrison echoed Mr Kingsley’s sentiment.

“This is a welcome and timely move by APRA which recognises the changed circumstances in the current interest rate environment for lenders and the residential housing market,” Mr Morrison said.

“It makes sense to revisit some of the measures originally put in place at the peak of the housing market. Different markets need different settings.

“A stable and well-regulated financial system is fundamental to our economic prosperity and it is appropriate that the guidelines for lending standards are regularly reviewed.

Mr Kingsley expects APRA’s announcement, along with a potential cut to the official cash rate from the Reserve Bank of Australia (RBA) and the government’s proposed First Home Loan Deposit Scheme, to help reverse the fall in property prices.  

“We already started to see signals that we've passed the worst of [the downturn],” he continued.

“I suspect that we'll see a flattening market pretty quickly.” 

However, Mr Kingsley does not expect changes in the operating environment to rekindle the housing boom.

“I think it's pretty clear that the macroprudential changes had reduced significantly the borrowing power of a lot of investors, so I still think they're going to be locked out,” he said.

“I'm not so sure that this is going to bring a flood of investors back into the market, but I certainly think it will mean that the manufactured correction will stop.”

Instead, the property industry veteran expects the market to gradually return to an equilibrium.

“When you get general house prices flattening or some signs of growth in some pockets, then consumer confidence returns, and consumption improves,” he said.

“The wealth effect is then back to where we want it to be, and that means we'll see jobs and growth.”

 [Related: Election result a ‘repudiation’ of ‘risky’ housing reforms]