Banks urged to ease the squeeze

Billionaire apartment builder Harry Triguboff has called on the banks to loosen their restrictive lending practices.

Harry Triguboff has urged banks to start lending again. Picture: Adam Yip.

Billionaire apartment builder Harry Triguboff has called on the banks to loosen their restrictive lending practices to restart the housing market and ward off an influx of foreign finance.

“We are all talking about the Reserve Bank lowering interest rates, but that is only a minor matter, Mr Triguboff said. “The banks must lend, they do not because they are afraid.”

The banking royal commission “can fix the system”, Mr Triguboff said, however he noted that it should not result in the banks halting lending.

“Now that we have shown where they were wrong, we must encourage them to lend, and use their discretion. If they (houses prices) drop, the economy suffers at once,” he said.

Housing prices in Sydney fell about 10 per cent over the past year, while in Melbourne values were down more than 8 per cent after both cities rode a five year boom ending in 2017.

“I don’t want us also to depend on high-priced foreign lenders to provide the finance instead of our banks,” Mr Triguboff said.

The Reserve Bank has left the door open for a cut in interest rates on the back of the souring housing market and weakening consumer sentiment, with Westpac chief economist Bill Evans last week predicting two cuts this year to take the cash rate to 1 per cent.

Housing finance has plummeted as banks reined in lending on the back of tighter regulation and the affect of the banking royal commission while sales to foreign buyers have fallen away and housing prices have been dropping for more than a year further weakening market confidence.

Mr Triguboff said apartment prices had fallen about 15 per cent, however his Meriton Group had seen resilient demand for rental apartments.

Rents were flat, but the company had few vacancies, he said.

Those renting had “great choice” now, Mr Triguboff said flagging the steep downturn in new building approvals would eventually eat into the supply glut.

Mr Triguboff owns more than 9000 apartments of which about 4000 are rental units and the balance are serviced apartments.

He said that the nascent build-to-rent sector, where institutional investors own apartment blocks for the long term, would stall here until the residential market recovered.

Potential developers and investors would hold off due to falling values, putting pressure on future housing choices, he said.

“Build to rent will not come as long as prices are soft. As soon as prices recover, build to rent will take place.”

Mr Triguboff — who has sold heavily to Chinese buyers — said developers had become too dependent on Chinese buyers.

Local buyers and funding sources would provide a more stable market, he said.

“Foreigners must only be an additional bonus.”

Foreign investment in Australian residential real estate has slumped on the back of back of foreign buyers taxes, restrictions on money flowing out of China and tighter credit in Australia.

The latest Foreign Investment Review Board figures showed real estate approvals dived 60 per cent to $12.5 billion in the 2018 financial year, the lowest level in eight years.

Chinese approvals for proposed residential investment fell to $23.7bn in 2018 from $38.9bn a year earlier.