Woof – The watchdogs have a bark!

Hot on the release of the Murray report, the Australian banking regulator (APRA) and the Australian investment and security regulator (ASIC) has today exposed teeth as they start growling and barking at our reckless banks.

Both regulators have launched an attack on prevalent risky residential mortgage lending practices, targeting in particular, loans to the overheated investor market.

According to reports, APRA has written to the banks today, telling them growth in loans to property investors should not exceed 10 per cent. APRA warns it stands ready to raise capital requirements early next year if banks do not take a more prudent approach to mortgage lending.

ASIC has today announced surveillance operations into interest only loans. In the September quarter, more risky interest-only loans reached a record high of 42.5 per cent of all loans issued. More property investors than ever before are betting prices will only go up, raising alarm bells among regulators.

» APRA launches crackdown on loans to property investors – The Age, 9th December 2014.
» Financial regulators united in attack on risky loans – The Sydney Morning Herald, 9th December 2014.
» APRA, ASIC increase surveillance of risky home lending – The ABC, 9th December 2014.


  1. Before we get too excited about controlling Australian banks we need to find out who their major shareholders are. SURPRISE! Its the usual suspects HSBC, JP Morgan, Citigroup and National Nominees. Together they could probably buy Australia and we know they already own the government. Well I guess the solution is to throw more taxpayers funds at them and hope they don’t get too angry.

  2. Nothing will happen.

    Nothing ever happens.

    They have been ‘warned’ before and the government never steps in.

    They make way way way too much money off housing and stamp duty to ever think of actually doing something about it.

    I’ve heard this song and dance so many times now. Just like N Korea with the nukes but the never pull the trigger.

    Anyone holding their breath for anything to change is going to suffocate well before anyone takes action.

    They don’t care only 1 in 50 buyers are first home buyers.

    Or that almost 50% of them are interest only and the rest are all 95% loans.

    Doesn’t matter a dam.

    What people don’t realize is the voting majority of people already own a house they want the system to keep going.

    The liberals and labor are playing hot potato with the housing market seeing who can avoid being the one in power when it all comes down. If liberals can push all the recommendations through, scrap negative gearing, scrap stamp duty, introduce land tax and stop smsf’s and then stop/ pause immigration just before their election say 12 months. Boom house prices crash while labor are in office and then liberals get to be in power for the next 20 years like the Howard government.

    For all the problems the Howard regime generated you have to admit… a lot got done. We enjoyed some pretty good returns. One can only hope if there’s a flip next election and everyone hates labor again like before we get another 20 year boom. It’s possible.

  3. Bit late as I think the horse bolted, came back and bolted again. The banks don’t care as they have the government to clean up the financial mess they will eventually create.

    When they get in trouble I would nationalize them – create a public bank to serve the needs of the community.

  4. Uh oh. From a Forbe article in 2005… The US rate of interest only loans was HALF that of Oz!


    Through the first half of the year, the share of interest-only mortgages as a percentage of all mortgage originations rose to 23% from 17% in the last six months of 2004, the vast majority of it in adjustable rate paper, according to the Mortgage Bankers Association. Meanwhile the share of more traditional adjustable rate products was falling, to 36% from 46%. Lenders piled into interest-only product, eager to keep underwriting volume alive.

  5. i personally think its all to late..too much damage has been done,australia has no way out of this.Appra sat on its hands way too many years

  6. Yes, many of the pegs are now starting to line up for the first time since the beginning of the historically unprecedented “party on paper” era (Mid-2002 to Mid-2014).

    The Pied Piper landed in Australia the other day for the first time since late 1998, but he is just currently waiting for the rest of his luggage to arrive at his point.

    I believe he will commence work in a major way in Australia in 2015 so quickly (starting with major regional/rural cities/towns then working in towards the capital and suburban areas, so drink up your last caffe lattes, place your last huge bets on the pokies and sell NOW (if you are not already living in a regional area – too late already if you are).

    Get ready for the absolute mother of all re-adjustments this country has ever known.

    For those of you who have waited it out patiently, congratulations…things will happen exponentially faster from here, so not long to go for bargain basement times.

  7. @ Claudem,

    Spot on. That’s what I see and what my guts tell me.

    When I see people struggle to operate that X5 with all the options, I ask myself..how does someone with such little sence come across that kind of money?

    Should I ask you good people or the banks?

  8. @ Claudem777 – i’m not so sure about this. e.g., Geelong prices have been essentially flat for several years, and there are no signs of anything falling off a cliff. i think things will slowly melt, and in time it might well be Melbourne that takes the biggest spanking as it saw the greatest run up of prices.

  9. I want a recession. Only then can I afford a house, buy cheaper goods and services and find a real job with long term prospects.

  10. @THEO

    I don’t think you’ll find cheaper goods or services in a recession.

    Hopefully economic events will allow you to land that ideal career.

    Sadly, “affordable” housing may not come out of a recession. A falling AUD will allow international real estate speculators cheaper real estate.

    The system is broken. Has been for some time. Only change will fix it, and some pain will be experienced with this change.

  11. @ Claudem777,

    if you go back to the 1830’s we had a massive re-adjustments.

    the question is will this one be as big as the last.

    run on the banks, a couple collapsed and property prices took ninety years to get back to the pre crash levels

    is that right admin?



  12. Chinese working population age has peaked 2 years ago. Even the chinese won’t need or be able to afford our property. Sure a percentage could but many middle class borrow from banks just like we do.

    So yes.. I’m over it.

  13. TC, I don’t think you realise the size of the Chinese population. Just their middle-class alone is far bigger than our whole population. So even if the Chinese working population peaked 2 years ago, there is no shortage of Chinese money heading our way.

    And you also don’t seem to realise the level of corruption there. They NEED to get their money out of China and out of the hands of their own government. Our government is only too happy to let them safely park their dirty money in our real estate.

    But if they do borrow from banks, they can do it at a cheaper rate than we can for Australian property. The cards are truly stacked against any Australian wanting to buy a home when competing with a foreign national.

  14. Yes it is too late. The up-tick in highly leveraged investors in the last little while makes the banking system extremely unstable. If there is a correction and we see a whole heap of investors in negative equity, either they default on their loans or cut back on their spending.

    This is the flip side of the “wealth effect”, when people are paying off a debt that is more than the value of the asset backing the debt. It is likely that rents will be falling in that sort of environment, making it even more difficult for the investors.

    I’m not sure of the implications of the limited recourse loans that are being used by SMSFs to leverage into property, but if these investors can walk away from the debt (without having to sacrifice any of their other assets) most banks will be feeling the pain. And even if they must sacrifice other assets the markets will no doubt be illiquid.

    The question is, will it be the shareholders or deposit holders who are hit, or both? But one thing that you can be sure of is that a lot of that private debt will be converted into public debt if such an event occurs.

  15. Probably one thing you can be even more sure of is the lengths the government will go to to continue propping up the housing bubble.

  16. There were a few articles on news.com.au this weekend that dealt with the plight of gen y and the millenials and also with negative gearing and foreign investment. Some of the comments made me so angry. There is just a massive sense of self entitlement to all the perks of high prices, tax concessions etc…especially amongst baby boomers. I’m so glad we are starting to see a shift in conditions with macroprudential controls. But I do agree that the damage has been done, there will be no slow mealt whilst people think housing is the best and only investment. My gut tells me things that sentiment will change in the second half of 2015 and something will happen in 2016. The mixing pot of rising unemployment, overcooked lending and a declining economy will spill over at some point.

  17. Well guys, it looks like the end is nigh for the Australian economy. 2015 is going to be the great unravelling from the look of things, barring some kind of economic miracle, which also is looking unlikely.

  18. The RBA wants the $A at 75 cents to the $US and if they cannot talk it down will have to reduce the interest rate. The result will be more funds diverted into non-productive interest only loans for real estate. When will the government realise that for capitalism to function it must have capital. The answer is to create a bank which lends to productive business. A good role model is The Bank of North Dakota. The only state owned bank in the US formed in 1919 to help local farming and businesses. It does not gamble with investors money on the derivatives markets and its main function is to invest in the community. Cut loose the big 4 as investment banks and us the funds to create jobs before it is too late.

  19. @ Patrick, comment 8

    Absolutely. Great observation. I have several customers who have no end of money, but you can tell they have NO idea of how the world functions, and earn a great income because of the distorted economy, not because they are brilliant people.

    I don’t care what people say, this era of fiat, fractional reserve currency will end, and badly. It’s mathematically impossible that it wont (as a math 20/20 student, of that I am sure).

    As an example: I heard the other day of a bank manager complaining how poor small business owners are at managing money, his main beef being that GST income should not be used as cashflow for the business. The facts are, ALL small businesses would love to raise their prices, but they simply can’t, there is no margins left anywhere for them. Between the government over regulating them and charging them all manner of levies and fees, and big business crushing them from the supply side and the competition side they are a dying breed. Of course the bank manager forgets that he gets to create cash with a few key strokes, vs the small business owner who has to deliver a real tangible product/service for his cash: Two very different circumstances.

    With the media beating on about how great this xmas season is, I bet an iced coffee that 2015 may well be an economic blood bath: I doubt we’ll get our long waited housing crash, but the economy will be hit hard again.

    Oh, and then there is Russia. Against all the ‘economic’ theory, they bumped their interest rates up 6.5% overnight: Now this will be interesting to watch what happens: All other G20 nations have cut rates to lower their currency and boost their internal economies: Russia have raised rates, to stop cash leaving Russia, and may well see cash flowing INTO Russia: Are we seeing the beginning of WW3, financed externally? Two things can happen with Russia from here: They experience a sharp, deep recession, or they push through and return to stable growth: Bold actions, totally unexpected and may just work.

    Imagine if they worked out that lowering rates wasn’t the silver bullet to fix the economy…. Oh, hang on, hasn’t Japan proved that for 25 years now? LOL.

    Get out of debt and own real assets. I’ve being saying it for years, and soon you will see why. Don’t get caught owning debt on an ‘asset’ worth cents on the dollar. You’ve been warned plenty.

  20. To reinforce my point in @ 22:


    Haha, can’t get a job anywhere: Maybe try real estate. LOL. Proves everything that’s wrong with the economy. Sure, I respect the guy for taking it to the next level and building businesses outside of real estate, but the kicker to his wealth it seems is just masses of fake fiat cash.

    When the global currency crisis really hits, the true entrepreneurs will show their skills, while most white collar fat cats will be wondering what the hell is happening.

  21. I like the idea of 2015 being the year the housing bubble popped and there are more than a few indications in may happen, but I wouldn’t get my hopes up.

    As the saying goes, you don’t have to worry about the things you don’t want, they seem to take care of themselves. It’s the things you do want that you have to keep your eye on.

    More than likely the government will attempt to kick the can down the road yet again. They are stuck between a rock and a hard place. If they drop interest rates, they hold out a little longer, at the same time edging closer to the cliff. If they raise interest rates, the sheeple will turf them out.

    It might be fair to say that collectively, we moderns no longer have the ability or reason to take the ‘long view’ on just about anything. We know what we want and we want it all now. That will change sooner or later.

    You could say it becomes a case of ‘act’ or be ‘acted upon’ and we would prefer to keep our creature comforts than get ourselves out of this pickle.

    So IMO we will not make the much needed corrections and sooner or later we will fall off the cliff together.

    Even when the bubble goes pop, the first year or two will be ‘false’ bubbles intended to pull you back into the market. Maybe by 2018 our houses might have come down closer to their true value.

    All of this is pure speculation of course:-)


  22. As much as Australia is in a property bubble, I can’t see it popping anytime soon. I say this as there are millions of cashed up Chinese who will keep buying Aussie property at inflated prices.

    And although foreign investors can’t buy established properties, they can get around this easily, buy getting family members who are Australian citizens to buy them in their name.

  23. @TC, an increase of the GST will definitely make the cost of livng more expensive, but it won’t pop the property bubble. It will take the removal of negative gearing, SMSF, the dramatic raising of interest rates, restricting foreign investment,etc in order to burst the property bubble, but don’t hold your breath on any of these things happening any time soon.

  24. Its a bubble with a thick skin. There are many forces and factors at work. Aus property is definitely seen as a bolt hole for obscene wealth from poor countries. Just in case the peasants revolt.In that case the rate of return doesnt matter. Another factor is that on average we have the smallest housholds in the largest homes. Many houses are like 2 houses by global standards. If everyone doubled up the price of a property might hold up while price per family falls. Yes, that translates as falling standards.
    Theres plenty of building trades work to do for decades, modifying big open plan houses to fit more people and also for energy efficiency.

  25. Dear friends,just repeating what you all know. Crown Council of 13 world’s richest most powerful families. COMITTEE OF 300 world’s richest most powerful sub-families. POWERFUL SUB FAMILIES.THINK TANKS.THE ROUND TABLE. The Trilateral Commission. Council on Foreign Relations. Royal Inst.International Affairs. United Nations. Club of Rome. The Bilderberg Group. WORLD FINANCIAL CONTROL. IMF WB Central Banks Tax Revenue Interest Revenue Bank of International Settlements. WORLD RESOURCE CONTROL. Corporations. WORLD POPULATION CONTROL. Religions.Teaches heavenly rewards for obeying rules. Governments.Secret service Military Police Courts Prisons Education.Programming the intellectual with status quo academia. Media.Controls the elites message to the masses. and lastly the 99%.We the people. POPULATION RESOURCE=LABOUR UNITS. DEBT SLAVES. Birth School Labour Taxes Debt Retirment cycle.

  26. Sydney property prices will continue to rise in 2015 and probably in 2016 as well.

    Waiting for Sydney real estate crash – not going to happen. Sydney prices are expensive but only because the market is willing to pay for it. If a FHB can’t get in, well there are plenty of properties out West.

    If you are not on the property train now, you will always fall behind.

  27. A big thank you to admin for their hard work for the year, I have enjoyed another year of this website.
    Merry Christmas and a Happy New Year to all involved and to everybody who has posted over the year.


  28. sadly,realistic i think yr incorrect,,im the 1% who actually know what going on since i travel from minesite to minesite every week to a different site and the lay offs are everywhere in mining,a lot more then reported,have u seen places like karratha and port headland after dark ,not one light is on on new estates,there is growing fear everywhere not just in wa

  29. @karl

    I gather you work in the mining industry?, and with these mining industry lay offs, you mention that the media are not reporting the true extent of the lay offs. Are we talking in the thousands here?, or the hundreds?

  30. Yoda,

    The supply and demand for energy and raw materials seems to be an egg and chicken type thing. One that is very much interdependent with economy, culture and environment.

    IMJ whether it be 100’s or 1000’s is but a drop in the ocean. However, it’s the trickle down from this into every corner of human existance that you have to be more concerned about.

    ENERGY is what keeps this monster called industrial civilization churning along and if/when the tap is turned off, everything changes in a heartbeat.

    In my mind, this is where we should be putting our time, money, energy and education BUT as a society we won’t!

    Just think of the countless non-value added jobs out there employing the masses (retail, coffee shops, personal trainers, etc, etc). This is where the first culling will occur.

    And to focus on housing alone seems a too narrow a view. IMJ better to look at the kinda community you want to be part of.

    Just an opinion of course:-)


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