Did Macquarie just put another nail in the coffin of Australian house prices?
Macquarie Group Ltd (ASX: MQG) may have just put another nail in the coffin for Australian house prices.
We have been covering the goings on with Australian house prices every month for quite a while now. The last few months has seen an acceleration of house price falls, with Melbourne and Sydney house prices showing declines of more than 1% a month.
Some people lay the blame at the hands of the major banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).
The size of the falls may be the fault of the big banks, but I still think house prices would be falling even without the effects of the Royal Commission.
Foreign buyers have been pushed largely out of the market by higher government fees, more scrutiny and capital transfer limits by the Chinese government.
There has long been a prediction of apartment oversupply because of excessive construction. We are still going through this with more apartments being finished.
A very large amount of interest-only loans are expiring and switching to principal and interest repayments. This is believed to increase borrower repayments by around 30% a month, which may be unaffordable for some.
Today, the AFR is reporting that Macquarie is ending its ‘Bank of Mum and Dad’ financing and borrowing for self-managed super fund property investments. Family loan guarantees are no longer offered as of yesterday and lending to SMSFs for residential property will end by the end of April.
Macquarie said that technological and operational complexity of its white label business and the new regulations from the Royal Commission led the bank to make the decision to leave that segment.
Foolish takeaway
I think it’s probably a good move by Macquarie because the property market is heading downwards and this could raise the risk of bad debts for Macquarie.
Macquarie seems like a well-run ship with very competent management making good decisions to me, although now may not be the best time to buy its shares.
I’d rather buy shares of one of these top ASX shares instead of Macquarie at the current valuations.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.