Facing up to the new credit squeeze

Challenges will emerge in our property markets as overseas buyers face new barriers to purchasing apartments.

Summary: The mining slowdown has in part been cushioned by Australia’s construction sector and the flow of funds into our major housing markets from Chinese investors purchasing new apartments. However, there are trends that could spell a slowdown on the horizon: for instance, we are seeing a two-tier market where, because overseas investors can only purchase new property, they are buying off the plan at and a higher price than local investors are willing to pay when that same property comes onto the market. The increased difficulty of getting funds out of China means a greater reliance on Australian banks to fund property purchases – and if our banks’ loan books extend beyond APRA’s requirements, banks will have to raise more capital.

Key take out: I believe if these trends play out, there will be trouble – it’s important for Eureka readers to be across the situation and think about their exposure to bank shares.

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