Are spots of Qld going to come into favour with banks?
Are spots of Qld going to come into favour with banks?

As Sydney cools, will banks gaze at overlooked Qld?

LENDING is shriveling across Australia, but some bankers are now looking for gold in recently overlooked spots: pockets of regional Queensland.

Financiers might even take another peek at the black-listed apartment market in Brisbane.

The logic is prospects are improving, due to factors such as mines rebounding and valuations lifting.

But cheap credit is not flooding back, yet. Banks and sources on the ground say while lenders might be more relaxed, they are not returning to the loose loans of earlier booms.

Banking is overall under pressure. Melbourne and Sydney's chilling property markets have hurt loan demand. Latest Reserve Bank of Australia statistics indicate nationwide credit grew 4.3 per cent in the year to January, compared to 4.9 per cent a year earlier.

Housing-loan growth shrunk from 6.3 per cent to 4.4 per cent. Morgan Stanley analysts estimated major banks' growth was just 3.1 per cent and would likely slow "given scrutiny around responsible lending, increasing competition and slowing demand". The bright side? Some smaller lenders were growing quicker.

At Townsville-based Queensland Country Credit Union, a 29-branch customer-owned lender, chief executive officer Aileen Cull says "January and February have been the strongest months that we've had for quite a number of years".

"(Big) banks are on the nose to some extent so we're seeing our share of people looking to deal with a local institution," she says.

 

VALUATIONS BACK?

Mackay, which glistened in the mining boom and greyed in the bust, stands out.

"The local economy … has bounced a little bit," Cull says. "Not high, but certainly off the bottom. We're seeing the property values down there have improved. So a couple of years ago, we would have been seeing a lot of deals being knocked backed because the values weren't coming up to where they needed them to be. And we're not seeing that to the same extent now."

Cull also highlights Townsville, Cairns and Stanthorpe among other strong areas. The latest flooding may impact Townsville short-term, but surprisingly so far QCCU has not seen deals abandoned.

Still, parts of North Queensland that didn't fall as hard as Mackay haven't rebounded as high. So while some home sales are occurring, Cull says these proceeds are used to repay loans. "It hasn't translated yet to a boom in confidence to go out and invest in new properties," she says.

For Bundaberg-based Auswide, a 21-branch lender, lending approvals for Mackay in the past year rose 10 per cent and for regional Queensland by 7 per cent. Improving confidence was feeding higher activity, Auswide CEO Martin Barrett believes.

 

Martin Barrett, CEO of Auswide Bank. Picture: Jono Searle.
Martin Barrett, CEO of Auswide Bank. Picture: Jono Searle.

 

Barrett says Auswide will try avoiding problems from the last boom. "We didn't have enormous exposure but we did have lessons," he says.

One example was problems with loans to large acreages more than 20 kilometres away from regional centres, he says. Any such loans now would attract harder scrutiny, including needing substantial deposits.

 

'PEOPLE COULD GET MONEY VERY EASILY'

Ben Chick, a real estate agent from Explore Property in Mackay, half-jokes people had loans approved in the previous boom by simply showing three pay slips. "People could get money very, very easily," he says.

Banks then backflipped in the downturn, losing any appetite, Chick says. Now, while he's not seeing overflowing spigots of credit, Chick says banks are increasingly pre-approving people for loans.

Paul Bryan, a real estate agent with Penny Wood Lane in Mackay, says banks were not becoming loose with home-loan deposits, unlike in the last boom. "They are looking for significant deposits," Bryan says.

While he is hearing chatter of banks being more willing to lend, he was not seeing that flow through yet.

 

QCCU chief executive Aileen Cull. Picture: Evan Morgan
QCCU chief executive Aileen Cull. Picture: Evan Morgan

 

Over at Melbourne-based NAB, Julie Rynski, who oversees regional and agribusiness operations, is examining opportunities from education to tourism in areas from Cairns to Toowoomba.

Toowoomba, for example, was gaining a reputation as "a logistical hub", Rynski says. NAB was opening a small-business hub there, she says.

Still, not everywhere is ballooning. "Some of the smaller communities, they are probably struggling a little more," Rynski says. One area showing steady improvement was Roma, where she says NAB recently lowered the level of deposit required on a deposit for home-owners.

Queensland's big market remains the southeast corner, and the RBA's latest Financial Stability Review found, while not widespread, parts of Brisbane's apartment market "experienced reasonably large price declines".

 

APARTMENTS AND GLUTS

Areas causing alarm about an apartment oversupply have included inner-city Brisbane. Caroline Jean-Baptiste, a broker with Mortgage Choice in Fortitude Valley, says compared to boom times, lending has "definitely tightened".

Valuers became tougher on apartments, Jean Baptiste says. Banks then brought in postcode restrictions such as seeking bigger deposits in suburbs with large unit markets.

The situation intensified last year when the royal commission prompted harder bank scrutiny of living expenses on loan applications.

But while things are still tight, Jean-Baptiste says: "In the last few months, we've seen more of a relaxation … we're seeing more valuations coming in at contract price."

Auswide's Barrett believes a slowdown in developers building new apartments had helped absorb a glut. "We've been pleasantly surprised that the unit market has remained more buoyant than some were expecting," he says.



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