Local experts advise the royal banking commission is having an effect on the Wagga property market but its real impact is yet to be determined.
Last year the banking regulator APRA advised banks to tighten their lending practices following misconduct in the banking, superannuation and financial services.
While Australia’s capital cities like Sydney and Melbourne have seen a decrease in property prices, according to Fitzpatricks 2018 property report, Wagga saw an 8.8 per cent increase in the volume of house sales.
Local financial adviser Julian McLaren said the Wagga property market is already “feeling the effects” of the royal banking commission.
“Banks are tightening their credit standards and as a result they’re being more thorough rather than relying on what people say their expenses are,” Mr McLaren said.
“As a result, the banks aren’t lending as much and it’s really impacted Sydney and Melbourne where homes have been very overpriced.
“However, the effect on Wagga could be a good outcome as people may decide to buy an affordable property and look towards Wagga where we have a credible return.”
It’s anyone’s guess what the commission will recommend and what is legislated, but I doubt it will get any easier.Developer, Daniel Donebus.
Mr McLaren said Wagga does not have “hugely un-affordable housing” and with strong owner-occupier interest, it could be a bonus for the regional city.
“Our construction sector is booming and certainly the biggest issue in Wagga is the lack of land being developed,” he said.
“There is more demand for land than people wanting to build or invest in homes and the demand for tradesmen is still strong.”
Developer and Wagga Business Chamber vice-president Daniel Donebus said the “scrutiny” of the banks has made it harder for buyers and investors to get loans.
“It’s anyone’s guess what the commission will recommend and what is legislated, but I doubt it will get any easier,” Mr Donebus said.
“This is a factor of success of the property market as a whole and and the lending component means the demand could be decreased.
“It has to be balanced out with the advantages we have here in Wagga and we are relatively good value compared to cities, with a strong local economy enabling support in the sector.”
Mr Donebus said developers will need to be more careful when moving forward with their developments.
“Obviously with significant holding costs in buildings and sub divisions and they will need to ensure their finances are in order and the demand is in order to work out exactly how much to supply going forward,” he said.
“There’s been material under-supply of land which can change quickly and in the end users are provided demand which is subjected to obtain the finance to move ahead.”
Domain CEO Jason Pellegrino said the commission is an ongoing process and it is “too early” to point to explicit outcomes.
“What we are seeing is that the process is having an impact on the property market, it is probably more pronounced in metropolitan areas than regional areas, particularly around apartment developments,” Mr Pellegrino said.
“The large finance players, like the big banks and brokers are reacting to the royal commission and clamping down on credit, which is changing the credit environment.
“We are seeing a significant reduction in pre-approvals and a significant uplift in the reevaluations of pre-purchased apartments before they come to settlement.”
Mr Pellegrino said these are implications that are making it more difficult for supply to flow through the market.
“I’ve met with agents in Wagga and it seems to be much more buoyant and a positive market here than what we’re seeing in the declines of listings and completions in the metro areas,” he said.
“The impact doesn’t seem to have flowed through to the same extent but with both a NSW and Federal level election it will depend what happens next year.
“Policies across both sides can have an impact on property in the market, but it’s still too early to tell as to what the real impact will be.”
Local builder Matt Jenkins said the ripple effects from the baking royal commission could be the "downfall" to small builders.
However, local builder Matt Jenkins argued that this is the “biggest issue” facing Wagga’s housing industry and could be detrimental to small builders.
“After the banking inquiry, a lot of dramas with new systems and regulations have come into focus and anyone that is signing a building contract must prove they have five to 10 per cent left over in funds for any variations,” Mr Jenkins said.
“The banks used to lend you 95 per cent of the house and while they’ll still lend you this percentage, they want to see $10,000 to $20,000 in the bank in case there are variations in the contract.
“For new investors and first home buyers who have no allowances for them to run over in the contracting, means they are struggling and unable to afford a house.”