HOUSE PRICE FALLS COULD SPILL OVER INTO SMALL BUSINESS, FINANCIAL REGULATORS WARN!

 

THERE is more to this!
THIS is what happens when housing becomes a commodity 

Scott Farquhars Elaine estate is next door to the Fairwater estate of Lady Mary Fairfax

Photo: Domain: Pt Piper

THIS is what happens when people who have more than enough are encouraged to have even more dwellings than they need and receive tax breaks for it

Frank Lowy's Point Piper home was extended in the early 1990s after they bought their son Stephen Lowy's house next door.

Photo: Domain: Pt Piper

THIS is what happens when a growing number of people in Australia are stuck with renting, never owning a home; just there to be exploited for life by a landlord class of ‘entitled’ opportunists

Australia has never had a ‘build to rent’ sector, so investors are wary of an untried product.

Photo:  SMH: Build to rent

THIS is the flip side of a system that is unsustainable 

.environmentally
.growth forever concept; we will need another EARTH to continue
.population demands that cannot be met

THE MODEL we have been propping up is cracking under the strain

-no real wage increases for over 5 years
-no expansion of anti-money laundering legislation
-a black economy that remains unchallenged
-political dogma and agendas shrinking governments capacity to do more with less

AND now a concern about falls in house prices flowing onto the rest of the economy, well halalooya 

BUT what about housing being about shelter, being about health and community?

IT doesn’t need to be a commodity, to be traded like gravel or sand

AND what  about the big picture issues like:
-having sufficient potable water
-energy security
-climate change events

THE LIST GOES ON …

 

 

House price falls could spill over into small business, financial regulators warn

BY BUSINESS REPORTER STEPHEN LETTS

Vitamin shop
PHOTO

Many small businesses have personal and business finances tied up.

JUNGMOON: FLICKR

Falling house prices could spill over into small business lending, squeezing already tight credit conditions and their ability to raise much needed cash, according to Australia’s top financial regulators.

In its second quarterly statement, the Council of Financial Regulators said it would closely monitor lending to small business and urged banks to maintain the supply of credit to the sector.

New lending to small business has slowed noticeably over the past year, and the situation was being complicated by the dependence of small business owners on residential property as collateral for loans, the council noted.

Roughly half the $220 billion of small business loans currently outstanding are secured against houses and apartments.

The council — chaired by Reserve Bank governor Philip Lowe and including representatives from the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and Treasury — are influential in regulating banks’ lending behaviour through their control of macroprudential policy which can be used to tighten or loosen available credit.

“For many small businesses, personal and business finances are intermingled. As a consequence, the higher standards that lenders apply to personal borrowing are affecting some small business loan applications,” the Council’s statement said.

“Further falls in housing prices could constrain small business borrowing, given that around half of loans to unincorporated businesses are secured by residential property.

“The council will continue to monitor developments closely and stressed the importance of lenders supplying credit to small and medium-sized businesses.”

Business lending in Australia

PHOTO Small business lending started to decline around the same time as house prices started to fall.

SUPPLIED: RBA, APRA

Orderly correction … so far

However, the regulators found while housing markets remained weak, falling prices did not pose a threat to the broader economy.

“To date the adjustment in housing prices and activity has been orderly and does not raise material financial stability concerns.”

It found slowing residential lending was largely due to a decreased appetite for borrowing, particularly from investors, as well as a more stringent scrutiny of borrowers’ expenses and other liabilities.

“The improvement in banks’ lending standards — including a lower share of high loan-to-valuation ratio lending — means that households and lenders generally are less vulnerable to falling housing prices than in the past.

 

“Despite historically high household debt, signs of financial stress remain relatively contained given a strong labour market and low interest rates.”

NAB’s Kieran Davies said, while the regulators appeared comfortable, they may need to change their policy settings if lending continues to dry up.

“Our view is that monetary policy remains the first line of defence against the slowing economy as we factor in the RBA cutting the cash rate to 1 per cent over the coming months, but that prudential policy might be tweaked if the supply of credit tightens further,” Mr Davies said.

 

SOURCE:  https://mobile.abc.net.au/news/2019-03-20/financial-regulators-warn-of-house-price-spillover-to-small-bus/10919508

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