AMP Capital chief economist Shane Oliver said the final report showed the royal commission was “not pointing to any further tightening”.
“The royal commission has reinforced the lending standards APRA has already put through the system and that tightening started back in 2017 and gathered pace into the early part of last year,” Mr Oliver said. “The anecdotes of it being harder to get a loan, that was happening around March, so the tightening and the negative impact on the property market because of credit tightening has already been evident and there aren’t recommendations to push that further.”
“The focus going forward will be making sure these regulations are maintained,” he added.
In the final report, Hayne acknowledged that a number of banks had already altered their lending procedures by further inquiring about a borrowers’ financial situation and by taking steps to verify each situation as well as reducing their reliance on the HEM, the household expenditure measure.
Property prices in Sydney peaked in mid-2017 and have been on a downward trajectory since, but they have fallen almost 10 per cent in Sydney and more than 8 per cent in Melbourne since the royal commission began.
“The effect of the royal commission on property will last for years but not forever,” Mr Oliver said. “You go through periods where lending standards become lax and then there’s some sort of blow up,” Mr Oliver said.
“There will come a point down the track where it’s concluded maybe the tighter lending has all gone too far, however I don’t think we will quickly return to an investor-driven boom.”
Economist Terry Rawnsley of SGS Economics agreed there wouldn’t be further “belt tightening” as the big banks had already pre-emptively made changes to their lending practices in the lead-up to the final report.
“I think they’ve already tightened and over-tightened,” Mr Rawnsley said. “We’ve seen in the last year that the housing market has softened, and that’s been driven by some policy changes like APRA’s crackdown on investor lending and state governments’ stamp duty surcharges for foreign buyers.”
Executive chairman of Loan Market Group Sam White said the final report brought certainty to the market for both buyers and banks and would see a return to a level playing field in terms of lending.
“There’s a lot of anxiety at the moment with talk of price declines and the royal commission has made people sit on their hands,” Mr White said.
“Some banks have gone a lot further than others in terms of tightening and I think those banks will get a bit looser, and others will become stricter,” he said.
“It’s the interpretation of [responsible lending] among lenders that’s been the problem. It’s become so hard to prove certain expenses – especially when you have six months of statements to go through – sometimes that’s 90 pages to pore through, especially now that tap and go payments are so popular.”
Mr White expected the approval process to become simpler and more consistent now that the royal commission had finished.
“This will give people more confidence to get approval to bid – and I think that will start to turn itself into sales in the middle or end of the year.”