Powered by MOMENTUM MEDIA
subscribe to our newsletter

Property both a ‘risk’ and a ‘key driver’

Morningstar analysts have flagged residential property as both a risk to the Australian financial system and a key driver of economic growth.

In a research report published Friday, Morningstar noted that the primary risk surrounding Australian banks – which it concluded remain in “excellent shape” – is the impact of record-low rates on property prices.

“The residential property market remains both a risk to financial system stability and a key driver of economic growth in the major population centres on the east coast of Australia,” the report said.

“Despite record-high residential dwelling construction, demand continues to exceed supply for both new and established housing, particularly in Sydney.

“Risks are centred on historically low interest rates boosting property markets to unsustainable levels,” it said.

Advertisement
Advertisement

The Morningstar report noted that there is an increasing expectation that interest rates could stay lower for longer and underpin the ongoing global search for yield.

The report provided an outlook for Australia’s major lenders, which it said remain in a strong position despite increasing competition from smaller non-bank players and emerging new technologies.

“Australian banks are in a sweet spot − the economy is not too hot and not too cold, reflecting historically low interest rates, low inflation, a lower exchange rate, lower petrol prices and strong property and equity markets,” the report said.

“Operating conditions for the banks are supportive of further good earnings and dividend growth, with solid credit growth boosting top-line revenue, good deposit growth, broadly stable margins, tight control of operating expenses and, most importantly, benign bad debts,” it said.

However, loan impairments are likely to start gradually increasing in late 2016 as the credit cycle inevitably turns, the report noted.

PROMOTED CONTENT


Property both a ‘risk’ and a ‘key driver’
mortgagebusiness

Latest News

The value of mortgage approvals swelled to a new record high in November, surpassing $24 billion, the ABS has found. ...

The construction of new homes in Australia is forecast to “get worse before it gets better”, according to Deloitte Access Economics, but...

The non-major bank has made an appointment to the newly created role of group general counsel and company secretary. ...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: A new record in mortgage approvals

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.