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The impact of lending restrictions on Sydney’s property market

In 2018, banks started toughening their lending criteria, restricting the amount they will offer borrowers and also making it harder to obtain a home loan in the first place. We’ve been exploring what this means if you’re buying or selling a home, and how it’s impacting on our sales process.

THE BANKING ROYAL COMMISSION AND LENDING

The 2018 banking Royal Commission heard evidence that some lenders had lax lending criteria, offering borrowers more than they should have been and failing to carry out proper checks that they could repay their debt. This was particularly linked to the fact that some bank employees and mortgage brokers had bonuses tied to the number of loans they could write and the amount they could lend.

As a result of this conduct coming to light, lenders began tightening lending criteria to prove they could self-correct their behaviour even before the Royal Commission’s findings were handed down.

The need for the banks to take action was accentuated by concerns that, with rising house prices, we were becoming too indebted and people were spending more money on servicing their mortgages. By June 2018, Canstar announced this was as high as 42 per cent of disposable income, the highest figure since 1995.

HOW THE LENDERS HAVE CHANGED THEIR CRITERIA

Perhaps the biggest change to come from the Royal Commission, is that lenders are often unwilling to provide as much finance as they once were. Anecdotally, we believe most borrowers have seen their capacity with the big four banks reduced by around 20-30 per cent over the past couple of years.

This means, for instance, that a potential buyer who may have been allowed to borrow $1.8 million in 2017, would now be able to borrow only around $1.3 million – $1.45 million. This obviously has a direct impact on the amount they can offer for a home.

Also important is that lenders are also trying to become more exacting in their assessment. Previously, many lenders would assess a potential borrower’s capacity to repay their loan by applying a “cost of living calculator”. Now, they’re more likely to ask for a detailed and accurate account of exactly where an applicant’s finances go. This usually includes asking for bank statements, receipts, bills, and more.

THE IMPACT OF LENDING RESTRICTIONS

We’ve noticed that, for risk-averse lenders, a steady job means stability – and stability means you’re more likely to repay the loan. Because of this, it has often become more difficult for business owners and entrepreneurs to get the finance they’re looking for. Even wealthy and asset rich business owners are being affected.

It is generally also taking longer for lenders to approve finance – sometimes longer than three or four weeks, making it harder for some buyers to act quickly and decisively, particularly for any property in a short auction campaign.

We believe these lending restrictions are the single most important factor in bringing down the average cost of Sydney property. After all, unemployment and interest rates remain at record lows and these usually have a direct relationship with home prices.

The restrictions are having a particular effect on prices at entry level, given that first home buyers and others in this range usually haven’t yet built up much equity in their home and need to fund their purchase with a substantial mortgage. They’re also affecting the mid-market, which often comprises maturing families who are traditionally happy to take out a substantial loan to fund a quality long-term home. In this part of the market, sellers also rely on getting a good price for their existing home to make the next step on the property ladder.

But where we’re seeing the biggest impact is in off-the-plan purchases. Declining prices mean that these properties often aren’t worth as much as they were when the buyer exchanged contracts. Many buyers who have put down a deposit sometime in the past are finding they can’t borrow the same amount they once could and this is often making it difficult to complete the purchase. Some are even choosing to forfeit their deposit and walk away.

At the other end of the spectrum, perhaps the least affected part of the market is the prestige sector, where buyers tend to be less reliant on a mortgage to fund their purchase.

THE OTHER SIDE OF THE COIN

That said, the current lending environment isn’t all doom and gloom. Interest rates remain exceptionally low and many economists believe they could fall even lower, with up to two rate cuts on the cards for 2019.

New lenders are also entering the market with different lending criteria and models to the traditional banks. We’re even seeing models such as crowdfunding began to take root.

While currently, these lenders seem to be the second port of call once a borrower fails to qualify for a bank loan, we believe they’ll soon start to be seen as a legitimate first-tier alternative to traditional lenders. This will even force the banks to reassess their lending practices or to launch spin-off brands or models to take them on.

There are also more lending products available than ever before, many of which are aimed at first time buyers.

HOW WE’RE ADAPTING TO LENDING RESTRICTIONS

The current restrictions affect the way we go about selling a home. There was a time when buyers would bid at auction or make an offer and then obtain finance. We try not to let that happen anymore. Instead, we now like to make sure a potential buyer has loan approval before they offer. Given the uncertainty, most buyers feel the same way.

We believe that, contrary to the Royal Commission’s findings, mortgage brokers have an important role to play in the current lending environment. At The Goldman Brothers we have an established partnership with Logix Financial Services, and recommend their lending services to our buyers.

Our view is that any buyer – no matter how wealthy – who doesn’t fit the mould the banks are looking for now needs a mortgage broker. After all, a good broker won’t simply help them effectively navigate the current lending landscape and point them not just to the best deal, but also to the one they’re most likely to qualify for.

Contact The Goldman Brothers for advice about buying and selling property in Sydney’s Eastern Suburbs.

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  • Posted by The Goldman Brothers
  • On May 1, 2019
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Tags: Eastern Suburbs, Home Loan, lending, Mortgage, property, Real Estate, royal commission
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THE GOLDMAN BROTHERS

Located in Double Bay, in the heart of Sydney’s Eastern Suburbs, The Goldman Brothers is a Sydney Sotheby’s International Realty team.

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The Goldman Brothers Team is having a wonderful en The Goldman Brothers Team is having a wonderful end to the year, selling two residences on Friday alone. Barry and Mark negotiated the sale of a stunning home at 2/7 Marathon Mews, Double Bay just one day after listing the property. An incredible result for all involved. They also sold an immaculately presented family home at 2/103A Birriga Road in Bellevue Hill prior to the scheduled auction. For further info click on the link in our bio.
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#sold #soldoffmarket #offmarket #soldpriortoauction #doublebay #bellevuehill #luxuryapartment #penthouse #luxuryhomes #sydneyeast #realestate #realestateagent #millionairedollarlisting #property #travel #propertyinvestor #realestateagency #vaucluse #realestatesydney #luxurylisting  #propertydevelopment #sothebys #sydneysothebys #goldbros #sydney #sydneyrealestate #sothebysrealty
Described by practice director Tony Chenchow as “an exploration of volume, form and light,” Glebe House in Sydney reflects the architects’ resolute commitment to expanding the sculptural potential of architecture. 
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Awarded a Jury Citation for Residential Architecture (New Houses) in the recent 2020 National Architecture Awards, Glebe House by Chenchow Little is a new take on traditional timber-lined bungalows and includes majestic upturned-arch windows that draws light into the sculptural white interiors spaces.
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Image - Richard Bennets
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#glebehouse #architectureawards #Architecture #Residential #Houses #Interiors #interiordesign #AustralianArchitecture #AustralianDesign #AustralianHomes #glebe #chenchowlittle #SydneyArchitect #SydneyInteriorDesign #luxuryhomes #sydneyeast #realestate #millionairedollarlisting #property #sydneysothebys #goldbros #sydney #sydneyproperty #houses @chenchowlittle
As part of our series on award winning local archi As part of our series on award winning local architecture and design, this week we focus our attention on 'GB House' by Sydney based architect Renato D'Ettorre. This magnificent house in Gordons Bay has won multiple awards including the coveted 2019 Wilkinson Award - The most significant residential architecture prize awarded in the state of NSW.
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About GB House - Positioned in a magical site above Gordons Bay, this house embodies the spirit of seaside living – endless ocean, rocky headland and the ideal north-east aspect.  The design is discreet in scale, has a quiet focus and layered materiality, and is sensitive to both site and neighbours providing mystery and privacy along one of Sydney’s busiest coastlines.
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To view this stunning architectural marvel click on the link in our bio.
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Image curtesy of @renatodettorrearchitects 
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#GBHouse #WilkinsonAward #Architecture #Residential #Houses #Interiors #interiordesign #AustralianArchitecture #AustralianDesign #AustralianHomes #Beach #ocean #CoastalLiving #SydneyArchitect #SydneyInteriorDesign
#oceanviews #gordonsbay #luxuryhouses #luxuryhomes #sydneyeast #realestate #millionairedollarlisting #property #travel #sydneysothebys #goldbros #sydney #sydneyrealestate @sydneysothebysrealty @barryigoldman @markgoldman1
Sold Dover Heights. With several high-profile sale Sold Dover Heights. With several high-profile sales, including the pre-auction purchase of this magnificent family home in Dover Heights last week, November is proving to be a great month for Goldman Brothers Team. Deny Bernardo and Barry Goldman did a great job marketing this exceptional residence and together they negotiated a sale price that exceeded vendor expectation.
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Click on the link in our bio for further information.
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#doverheights #luxuryhouses #luxuryhomes #sydneyeast #realestate #realestateagent #millionairedollarlisting #property #travel #propertyinvestor #realestateagency #vaucluse #realestatesydney #luxurylisting  #propertydevelopment #sothebys #sydneysothebys #goldbros #sydney #sydneyrealestate #interiordesign #architecture @sydneysothebys
Sold ‘off-market’ in 3 days. No advertising, m Sold ‘off-market’ in 3 days. No advertising, marketing or sales campaign. Just what we do best...matching buyers to properties and negotiating the sale.
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Click on the link in our bio for further info. 
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#doverheights #luxuryhouses #luxuryhomes #sydneyeast #realestate #realestateagent #millionairedollarlisting #property #travel #propertyinvestor #realestateagency #vaucluse #realestatesydney #luxurylisting  #offmarketsale #propertydevelopment #sothebys #sydneysothebys #goldbros #sydney #sydneyrealestate #interiordesign #architecture @sydneysothebys
The Design Files + Laminex Design Awards 2020 were The Design Files + Laminex Design Awards 2020 were announced last week, with some stand-out local projects amongst the awards. 
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This is the winner of the Residential Architecture award; Bismarck House at Bondi Beach by Andrew Burges Architects. 
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Click on the link in my Bio to see this and all other winning projects. 
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Photography by Peter Bennetts & Prue Ruscoe
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#luxuryhouses #beachhouse #bondibeach #bondi #beach #luxuryhomes #realestate #realestateagent #property #travel #realestateagency #realestatesydney #luxurylisting #propertydevelopment #sothebys #sydneysothebys #goldbros #sydneyrealestate #interiordesign #architecture #designawards #architectureawards
One of Bondi's best Penthouses, 701 at the Boheme, One of Bondi's best Penthouses, 701 at the Boheme, Bondi Beach has just been sold 'off-market' by Barry and the Goldman Brothers team at Sydney Sotheby's International Realty. With privacy paramount, the sale of this spectacular beachside residence was conducted in confidence, with the purchaser brought into the negotiations via our expansive network of industry contacts. Whilst the details of this sale are confidential, we are more than happy to discuss our various sales and marketing strategies with you, including 'off-market’ campaigns. 
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Click on the link in our bio for further information.
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#luxuryapartment #penthouse #bondibeach #bondi #beach #luxuryhomes #realestate #realestateagent #millionairedollarlisting #property #travel #propertyinvestor #realestateagency #realestatesydney #luxurylisting  #propertydevelopment #sothebys #sydneysothebys #goldbros #sydney #sydneyrealestate #interiordesign #architecture @sydneysothebys
There's nothing better than getting feedback for a There's nothing better than getting feedback for a job well done. We're so glad that both clients (vendor and buyer) were happy with the outcome of this sale. For more client testimonials check out the link in our bio.

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#testimonial #ratemyagent #barrygoldman #luxuryhomes #privatesale #doublebay #bellevuehill  #doverheights #bondi #realestate #realestateagent #millionairedollarlisting #property #propertyinvestor #realestateagency #realestatesydney #luxurylisting #propertydevelopment #sothebys #sydneysothebys #goldbros #sydney #sydneyrealestate #interiordesign #architecture
We've just listed this beautiful 3 Bed 2 Bath 2 Ca We've just listed this beautiful 3 Bed 2 Bath 2 Car apartment in Bellevue Hill. Immaculately presented, this family home has been stylishly redesigned throughout and comes with an on-title garden, large covered balcony, new kitchen and new bathrooms. Click on the link in our bio for further info.
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#familyhome #apartment #bellevuehill #luxuryhome #realestate #realestateagent #sydneyeastersuburbs #property #propertyinvestment #realestateagency #realestateexpert #realestatesydney #luxurylisting #bondibeach #rosebay #sothebys #sydneysothebys #goldbros #sydney #sydneyrealestate #interiordesign #architecture @sydneysothebys @markgoldman1 @barryigoldman
And sold! This stunning penthouse at 43/16 Neild A And sold! This stunning penthouse at 43/16 Neild Ave sold at auction (on-site) earlier today. A great result for all parties.
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Barry Goldman – 0418 890 210
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