Finance Predictions For 2019
Well here we are, another year is upon us and like every year, I am full of optimism and excitement for the year ahead. Now, of course, this excitement only has a finite amount of life in it and I'm sure I'll no doubt turn into my bitter, jaded self in the months ahead!
However, nonetheless, I wish you a belated HAPPY NEW YEAR and hope 2019 will be your best year yet. Now as a broker, I’m sure my fellow colleagues would agree, 2018 was a challenging year. In fact, the last three years have been pretty bloody difficult for our industry!
As I look back at last year, for me it was the year when consumers truly became aware of the some of the challenges the finance industry has had to face via the much publicised and talked about Royal Commission.
So what is ahead for 2019? Will it be the year where things get even tougher for property markets or is it the start of yet another growth phase?
Here are my five predictions for the year ahead:
1. The Royal Commission will see moderate changes
The seventh round of hearings concluded at the end of last year with the final report and recommendations to government to be completed next month.
What will come out of the report is anyone’s guess but I think there will not be wide sweeping changes that will turn the finance industry on its head.
Current remuneration models that exist for brokers will stay in place and there will be further compliance requirements placed on the industry as opposed to fundamental changes.
2. Credit policy will start to relax
In late 2014 APRA imposed significant restrictions on banks to cool down property markets. Recapping those were:
- 25% capital requirement on investment loans
- Limit of 10% growth on investment loans
- Limit of 30% of all new loans to be interest-only
Did these measures work? The answer is a resounding yes! Interest only loans are down 55% overall and now represent just 16% of all new home loan approvals. Investment lending is also down around 20% as well.
Over the last few months we have seen APRA remove the last two restrictions and for me, point toward credit policy no longer being as tough as it has over the last few years.
3. Interest rates will remain stable
Historically interest rates increase in order to cool a rising market and lower when things become flat in order to stimulate spending.
Property markets of Sydney and Melbourne have peaked and we’ve also seen Australian shares dip 6.9% last year as well.
Unless something happens this year that significantly improves Australian business markets, I just can’t see this rate rise that a lot of people have been talking about.
4. Smaller lenders will continue to gain market share
The major banks got slammed during the royal commission and their message to the market since has all been about simplification.
Westpac was the only bank not to move away and sell off their financial planning and insurance businesses. None of them do SMSF lending anymore and over the next 12 months I believe they will continue to reduce their offerings.
2019 will be the year that smaller lenders with niche offerings will gain significant market share and fill the gap left by the major banks. I know my business has never engaged more with 2nd and 3rd tier providers and this will continue to be the case this year.
5. A change in government won’t cause significant pain for investors
The liberal government has done an amazing job of putting themselves in a terrible position with the upcoming election to happen this year. However, their one shining light will be delivering on Tony Abbott’s promise four years ago about achieving a budget surplus.
By the time we hit the voting booths, we will be sick of the liberals banging on about this.
It may not be enough to save them from a labour win but presuming labour do get in, their tough promises a few years ago about scrapping negative gearing and changes to CGT came at a time when markets were at their peak. We’re now in a different phase and I think any changes they make will be much more measured and shouldn’t cause investors too many sleepless nights.