Banks holding back the big ticket property market: Mal James
Banks are holding back the property market, according to the Melbourne buyers' agent Mal James.
“I suspect that one of the reasons buyers are increasingly reluctant to stretch themselves at some of the big-ticket auctions is that banks have become increasingly tight-fisted in their lending.
“Their letters of offer are not as forthcoming, and there are clear use-by dates with no guarantees of renewing older bank offers," James says.
James suggests the nervousness is filtering through to valuers, who are responding with lower valuations on bricks-and-mortar securities.
“And, in something of a vicious circle, their new lower valuations are ultimately re-feeding the bankers' nervousness.
“The bankers’ concerns are then being passed on to their clients, the buyers."
James Buyer Advocates analysis of the miserably wet day of Melbourne auctions concluded with a 50% clearance rate among the 32 $1 million-plus auctions the group attended in the inner east and bayside.
"The average number of bidders per auction was 1.5, and half the auctions were one bidder (lone rangers) or (no bidders) ducks," James says.
While noting there is still strong demand for quality stock, James notes there are some major pass-ins on big-name properties including Barwon at 38 Cromwell Road, South Yarra, which received no bids other than a vendor bid of $5 million.
"There were also no bids for the Edwardian at 1097 Malvern Road, Toorak - which passed in at $2.8 million, or the contemporary family home at 16 Banool Ave, which passed in at $2,550,000."
James notes it is not that the banks were necessarily refusing loans, but they arelowering the LVRs (loan-to-value ratios).
“And this in turn is being reflected in more conservative bidding at auctions and private sales,” he says.
“This in turn means there is less money overall in the market – and so you can feel the tightening collars as the money tap is slowly being turned off.”
Melbourne's overall weekend cleareance rate was 58%, which mirrored Sydney's 58% success rate.
