Property prices continue to drop as bank stocks rise

Property is said to be in its worst slump in a generation, but it’s not stopping billionaire Harry Tiguboff from continuing to develop.

The 85-year-old billionaire, who according to the Bloomberg Billionaire’s Index is worth A$13 billion, is continuing his expansion plans, telling Bloomberg "If prices fall, I'll buy the land cheaper. As long as you don't lose your cool. You have to look at things in the longer term."

‘High-Rise Harry’, as he is known, has built one of every 10 apartments in Sydney through the tightly held Meriton.
Meriton has overseen the construction of over 75,000 residential dwellings.

Triguboff, clearly has the money and the stones, to weather the property storm, but following the final findings of the recent Banking Royal Commission, not everyone is so upbeat.

Mortgage brokers, in particular, are crying foul of Commissioner Hayne’s final findings.

Mortgage Choice Chief Executive Officer, Susan Mitchell, last week called on Federal Treasurer Josh Frydenberg to initiate consultation with the mortgage broking industry before any reforms to remuneration are made.

Ms Mitchell said the broking industry has just had its entire world changed without any consultation.

“There is no right of reply to the Banking Royal Commission’s recommendations and the industry has significant concerns about the impact on consumers and competition if the changes are implemented without industry discussion."

Hayne recommended the borrower, not the lender, should pay mortgage brokers a fee for acting in connection with home lending. The Commissioner also recommended that a Treasury-led working group should be established to determine what fee that lenders should be required to charge to achieve a level playing field.

“Currently, if all of the Commission’s recommendations are adopted, the banks will be given the green light to charge a multi-thousand dollar fee to borrowers to secure a home loan product. This will hit borrowers hard, after they’ve saved for years for a deposit totalling tens of thousands of dollars. Further, the unintended consequence of handing back power to the banks is a possible steady increase in interest rates,” said Ms Mitchell.

“These changes will result in poor consumer outcomes, which is not in line with the original intentions of the Banking Royal Commission,” said Ms Mitchell.

The banks themselves are still being hit, although the share prices of the major four either held steady or rose after the report was released (down slightly last week).

The report was released on a Monday and on the Tuesday the banks’ share prices surged $20 billion in one of the biggest one day value increases in history.

It is still worth waiting to see where the dust settles when considering bank stocks, but the report didn’t hit hard.

So, while property investors are staying away (High-Rise Harry excluded), bank investors look to be unfazed.

Now let’s wait to see what happens to stocks if the property market drops further or the Royal Commission recommendations are implemented.