Home loan lying fuels explosive mix

Home loan lying fuels explosive mix, by Robert Gottliebsen.

Do people in Sydney and Melbourne tell more lies than those in other parts of Australia?

When it comes to filling applications for bank loans to fund residential property they certainly do.

In NSW an incredible 38 per cent overstate their income (usually by about 10 per cent) and/or understate their living expenses.

Victorians are not much better. …

These facts come from an incredible survey by UBS. The simple fact is that the property prices in Sydney are so high that 38 per cent of the buyers have to lie to their banks to get a loan and if they use a broker that broker will make their lies more plausible.

Accordingly a greater proportion of NSW and Victorian loan lies come from loans arranged by brokers. And my guess is that those lies are much more skilfully crafted so they are believable. But lies they are.

Until now it hasn’t mattered that much because as incomes rose the lies were papered over and in any event the property usually also rose in price. Time corrected the lies.

But this time around not only has the lying risen almost 50 per cent but events are not happening the way that was planned. The 2017 porkies are looking like clear deceit because incomes are not rising. And in parts of the Sydney and Melbourne markets — particularly apartments — prices are not rising. Indeed a month ago Australia’s biggest apartment owner Harry Triguboff warned that they were actually falling. …

So my guess is that those people who lied to get a Sydney apartment are feeling very unhappy and many of them are coming to understand that the rise in computerisation is making their jobs a lot less secure. Journalists have experienced this for years but now bankers, accountants and lawyers are getting edgy.

Obviously if interest rates rise and/or the lower prices spread beyond apartments then we will have a very dangerous situation not only in our banks but in the entire economy. …

Chinese buying was a huge driver of the market but has been slashed. State governments are imposing a series of taxes and charges to make sure the Chinese feel unwelcome. And demand has been slashed by increasing regulations from China on taking money outside the country and by the refusal of the local Australian banks to fund the Chinese. …

Some of the smarter bank chief executives are looking at their own long term plans and realising that they are still lending on the basis that people’s incomes will rise as a matter of course, but in fact a big number will fall as a result of the looming retrenchments in the professions.