Do it all again: Conveyancers hit as banks reassess investor loans

CONTROVERSIAL federal budget tax changes have compounded problems for conveyancers amid a market downturn, as investor clients have loans reassessed by major banks.

Westpac is said to be among the banks that have said they will not honour pre-approved investor loans until they are reassessed, a move sparked by the government’s proposed budget ban on negative gearing for existing properties.

AIC NSW president Jennie Tonner said with banks withdrawing pre-approvals issued before the budget, clients were having to apply again, causing flow-on effects for conveyancers.

“It just means fewer clients – our investor clients are non-existent. A large amount of conveyancing is for investor clients,” Tonner told Australian Conveyancer.

She said conveyancers, in the wake of the moves, should be telling investor clients “to check with their bank and broker if they’re at the pre-approval stage and they may need to re-apply”.

“I’ve got a client who was looking at a one-million-dollar investment property, and his borrowing capacity went down by 200 grand. He’s now got to look at a completely different area,” she said.

Tonner said it added to a slowdown as investors stayed on the sidelines due to reluctance to invest in new builds, despite the segment being carved out of the proposed changes.

Investors were worried, Tonner said, about investing in new housing, especially strata units, that “possibly may be riddled with defects”.

“An investor who wants a property doesn’t really look at things like that. They want to be able to buy it and forget it – they don’t want to be constantly hit by special levies and things like that, so there is a flow-on effect there.”

Tonner said many investors would likely stay out of the market until after the next election.

The Liberal-National coalition has pledged to scrap the changes if elected at the next national poll, which is due by 2028.

“When we do have another election all Labor, or Liberal or One Nation need to say is that they will scrap that budget and that will encourage growth,” Tonner said, adding that if the changes failed to pass through parliament “then we might be ok”.

The move by financial institutions to reassess investor loans marks another blow to conveyancers already hit by a downturn in investor demand following the budget.

Australia’s housing market stalled in May, with national home values stagnant after months of slower growth, led by Sydney and Melbourne.

There are predictions of more pain to come for the sector, with some experts warning property prices could fall by up to 10 per cent nationwide as investor demand slumps on lower expected returns and reduced borrowing capacity.