2018 was a tumultuous year for conveyancers and property lawyers with an extraordinary amount of change being introduced to how we conduct property exchanges, the rules and laws that govern us, and the flow on commercial effects these changes caused. The commencement of 2019 has seen the dust settle somewhat, however the broader market seems anything but settled. A reduction in foreign demand for Australian property over the last two years, a tightening of lending by the banks due to apprehension of the Royal Commission recommendations and further apprehension as the market anticipates the results of the pending federal election, have resulted in a significant reduction in the volume of properties being transacted in the final quarter of 2018.
The Hayne Royal Commission findings are now in and both sides of Government have indicated they will implement the recommended changes. If share prices are any measure, the banks seem to have gotten off lighter than expected, with bank shares seeing their greatest gains in a decade. This may see confidence returning to investors and lenders and capital flowing back into the property market. However, it is more likely that the market will remain cautious until the outcome of the pending federal election in May. Labor are proposing significant changes to Capital Gains Tax and negative gearing rules that, should they come to pass, will significantly change the property investor landscape. Such changes if adopted will be unlikely to be implemented until the 20/21 financial year due to the timing of the election.
Although the impact on big banks from the Royal Commission was less than expected, mortgage brokers may be severely impacted. Their main source of revenue is threatened with trail payments from the banks in jeopardy. Brokers are now lobbying the government to not adopt the recommended changes. If the Government does adopt these changes, brokers may need to charge their clients (the borrowers) up front for their services, rather than the lender paying for the referral. The share price of publicly listed mortgage broking businesses have reflected this news, showing significant falls.
The majority of our clients source their lending through mortgage brokers, resulting in greater choice, exposure to a broader panel of lenders, and strengthening competition between the lenders. It also benefits borrowers to have an advocate in their corner that can go in to bat with the lenders when applications go wrong, become complex and or need pressure applied to meet settlement deadlines. I feel that any perceived or real benefit of the implementation of recommendations of the Hayne Royal Commission to mortgage broking will be far outweighed by the negative impact on consumers and all our friends and their families in the mortgage broking sector. Hopefully common sense will prevail.
However events unfold in 2019, Sargeants Port Phillip stands poised to deliver the very best in conveyancing services.
George Morison
