Mortgage Choice chief John Flavell bullish on property outlook

Mortgage Choice chief John Flavell says owner-occupiers are filling the gap left by investors in the property market.

Mortgage Choice chief executive John Flavell.

Mortgage Choice chief executive John Flavell says owner-occupiers are filling the gap left by investors in the property market and house prices on the eastern seaboard will continue to kick higher.

Mr Flavell also believed a number of lenders had overreacted in their repricing of interest-only products as a result of APRA’s crackdown on investor lending and the pendulum would “swing back the other way” in a matter of weeks. In March, the Australian Prudential Regulation Authority set out new rules restricting interest-only loans to 30 per cent of new residential mortgage lending. To reduce demand for the loans, favoured by property investors, banks have sharply hiked rates for interest-only borrowers.

Mr Flavell said most of the brokers’ lender partners had built a buffer and taken a conservative approach when pricing interest-only loans.

As a result, they had “quite a margin” between what they were lending and breaching the cap.

“My expectation is that a number of lenders have overreacted in repricing their interest-only products.

“They’re finding they’ve got some headroom between the caps and what they’re actually lending, and I think in the next couple of weeks the cost of interest-only loans will actually come back a bit,” he told The Australian.

Australian Bureau of Statistics data show home loan approvals holding at about $33 billion on a monthly basis, despite the slowdown in investor lending, and Mr Flavell said “one is filling the gap left by the other”.

He said while supply in certain parts of the market, such as apartments in the Melbourne and Brisbane CBDs, might be getting ahead of demand, the overall picture was of growth.

“The consensus view is that house prices across Brisbane, Sydney and Melbourne will grow 4-5 per cent on an annual basis over the next 12-24 months. I don’t think that assumption is unrealistic at all — that seems fair and reasonable to me.

“Typically our market doesn’t get too far ahead of itself. We need about 20,000 units of housing every year just to accommodate the growing population. Where houses get built and where people want to be and the nature of the stock doesn’t always line up, but the market typically doesn’t get too far in front of itself before it corrects itself. And you’re already seeing there’s a reduction in new building approvals and dwelling commencements, so the market reacts pretty quickly.”

The mortgage broker yesterday booked a 13.5 per cent lift in full-year profit to $22.2 million after growing its loan book to a record $53.4bn.

Settlements also rose to a record $12.3bn in the year, while commission for new loans increased 3.8 per cent to $75.1m.

The broker will pay a final dividend of 9c a share, fully franked, taking the total year’s payout to 17.5c.

In terms of housing affordability, Mr Flavell said the biggest challenge was for first-home buyers trying to get into the market and more investment was needed in infrastructure and to build up regional cities.

“The amount used to service a mortgage is typically less than a household would spend on rent, so how can we get more people out of renting and into their own home?”