In the fairytale of rising property prices the banks have been cast as the villain: Ewan Morton

In every good fairytale there has to be a villain, a wicked evil doer seeking endless riches at the expense of the poor innocent townsfolk.

In the current fairytale of rising property prices in Australia it appears the banks have been cast in that role.

In just the last few days I’ve heard of numerous warnings from domestic and international monetary policy bodies about the need for banks to retain firm lending policies. The release of the minutes of the September Reserve Bank Board meeting called on banks to retain prudent lending practices and the IMF has said the same.

It is easy to blame the banks for fuelling property demand. With rates so low the competition for business is strong and money is as cheap now as it’s been for as long as I can remember.  

It might be a little unfashionable to be calling for caution when the market is heating up faster than the spring temperatures but I continue to urge buyers and vendors to take it easy.  

Yes the market is strong. Demand is there because there continues to be a shortage of properties. But it is important to retain reasonable expectations.  And that applies to those seeking finance.  

Remember that real estate is a good news story but don’t forget that every fairytale has a villain and don’t get too carried away by the potential happily ever after.