Westpac has sent another shiver through an already-anxious Australian property market by announcing it will no longer lend to self-managed super funds wanting to invest in residential property.
In a move designed to “streamline” its product offering, Australia’s second-biggest mortgage lender, confirmed on Friday it would stop selling its SMSF home loan products, along with its subsidiaries St George, Bank SA and Bank of Melbourne.
A spokesman said that, as far as the bank was aware, Westpac is the only major bank currently offering this type of lending and will stop writing new loans of this kind at the end of July.
The bank will continue servicing its existing loans.
The move follows a widespread tightening of bank lending practices, which has included several waves of macro prudential regulation changes and an ongoing royal commission into the financial services industry.
The clampdown has seen lending to residential property investors slump to its lowest level in seven years, according to recent ABS data.
A Westpac spokesman said SMSF lending represented a “very small portion of our portfolio”.
“We continually review our products and services to ensure they meet the requirements of our customers,” he said.
“In order to simplify and streamline our self-managed super fund products, we will be withdrawing from the sale of our SMSF home loan product and business lending to SMSFs, effective Tuesday, July 31, 2018.”
Fresh blow to market
The news comes as another blow to floundering confidence in Australia’s key property markets, according to Market Economics managing director Stephen Koukoulas.
“At a time when we know demand [in residential property] is tapering off for a number of reasons, it’s just another proverbial straw that goes onto the back of an already-weak housing market,” Mr Koukoulas said of the latest news from Westpac.
He said that while these sort of loans were “important but not huge” in driving property markets, the removal of SMSF home loans was “another hindrance to a market that is clearly already weak”.
Sydney’s auction clearance rate over the weekend was 47.8 per cent – one of the weakest results in 10 years – while Melbourne recorded a 56 per cent clearance rate from a low number of sales, Domain data shows.