{"id":42695,"date":"2023-03-30T09:29:27","date_gmt":"2023-03-29T20:29:27","guid":{"rendered":"https:\/\/propertynoise.co.nz\/au\/?p=42695"},"modified":"2023-03-30T09:29:27","modified_gmt":"2023-03-29T20:29:27","slug":"leading-lender-says-brace-for-recession-prepare-for-take-off-in-2024","status":"publish","type":"post","link":"https:\/\/propertynoise.co.nz\/au\/leading-lender-says-brace-for-recession-prepare-for-take-off-in-2024\/","title":{"rendered":"Leading lender says brace for recession, prepare for take-off in 2024"},"content":{"rendered":"

PHOTO: Mark Bouris, Chairman of Yellow Brick Road Group, delivered compelling economic forecasts and surprising insights into the current lending landscape at the UDIA National Congress staged in Perth.<\/strong><\/p>\n

REPUBLISHED WITH PERMISSION | API MAGAZINE<\/a><\/p>\n

In a wide-ranging keynote address to the UDIA National Congress 2023, one of Australia\u2019s foremost financial advisors described how lenders are discounting heavily to retain borrowers, predicted a recession, and said late 2024 would be the time to invest in property.<\/p>\n

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One of Australia\u2019s foremost financial advisors has warned Australians to brace for a recession but prepare for a property market that will rebound strongly in late 2024.<\/p>\n

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New Zealand\u2019s Housing Market Crash Could Spell Disaster for Australia | WATCH<\/a><\/h2>\n<\/header>\n<\/div>\n

Mark Bouris, Chairman of Yellow Brick Road Group and a Member of the Order of Australia (AM), on Tuesday (28 March) told attendees of the Urban Development Institute of Australia\u2019s National Congress 2023 that the Reserve Bank of Australia (RBA) will not stop its cycle of interest rate rises until inflation is tamed to at least 4 per cent.<\/p>\n

In a wide ranging keynote speaker address in Perth, Mr Bouris also said that lenders, including the big four banks, are discounting their loan offerings to the point where they are\u00a0surrendering\u00a0any profit\u00a0from the customer.<\/p>\n

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Mark Bouris AM, Chairman, Yellow Brick Road Group.<\/strong><\/em><\/p>\n<\/div>\n

He said Yellow Brick Road, which has a loan book worth $50.9 billion, had seen new business plummet since Covid as\u00a0lenders were left to squabble over refinancers\u00a0and cling on to existing customers.<\/p>\n

\u201cFor every 2 per cent that the retail lending rate goes up, we\u2019re going to lend 20 per cent less,\u201d he said.<\/p>\n

\u201cWhere we were doing something like 80 per cent new business during Covid, that\u2019s now around 55 per cent with the balance just being refinancing.<\/p>\n

\u201cI have never seen in my 35 years in the industry, a more competitive environment in terms of mortgage pricing.<\/p>\n

\u201cMost of us are lending at cost and making no margin, bank margins are shrinking and that\u2019s all because we\u2019re competing with each other, a lot of times lending money and making no margin but doing so to build up our inventory of mortgages to retain market share.\u201d<\/p>\n

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From commercial fisherman to luxury million-dollar agent<\/a><\/h2>\n<\/header>\n<\/div>\n

This competitiveness provided borrowers with the chance to negotiate a discount on the variable home loan of around 1 per cent, he said.<\/p>\n

\u201cRight now many fixed rates are leaping from around 2 per cent to 5.5 or 6 per cent but borrowers in that situation can push for a 1 per cent discount to save some money.<\/p>\n

\u201cI know I would rather give someone a 1 per cent discount on our product than lose them and try and go find a new borrower, because I\u2019m already giving away one per cent in advertising and other costs in luring that new borrower,\u201d Mr Bouris said.<\/p>\n

\u201cSo\u00a0the upcoming mortgage cliff\u00a0is not quite as bad as everyone is talking about, as lenders will turn themselves inside out to keep an existing borrower.\u201d<\/p>\n

He said lenders were cutting costs and living off their old business and breaking even on the new, in the hope that the market and interest rates will normalise down the track.<\/p>\n

\u201cI can\u2019t foresee banks and lenders sourcing their money more cheaply for a period of time, while we have this irrationality out there in the money markets.\u201d<\/p>\n

Recessionary fears becoming a reality<\/strong><\/h2>\n

When it came to second guessing the RBA, Mr Bouris was adamant that\u00a0more rate rises were forthcoming\u00a0but said the big question was how long they would be sustained when they hit a peak.<\/p>\n

Echoing the sentiment of former Prime Minister Paul Keating, who as Treasurer in 1990 famously described that era\u2019s economic decline\u00a0as \u201cthe recession we had to have\u201d, Mr Bouris said the RBA Board was probably thinking along the same lines even if it would never utter the words publicly.<\/p>\n

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Signs house prices won\u2019t crash<\/a><\/h2>\n<\/header>\n<\/div>\n

\u201cI think we will end up in a recession \u2026 and that the unemployment number will have to push up to 4-plus per cent to take that pressure off price-wage-inflationary pressures, and to get the narrative to shift so that it\u2019s no longer about inflation anymore, it\u2019s about recession.<\/p>\n

\u201cThe RBA have to break something,\u00a0and that something is spending.\u201d<\/p>\n

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Australia’s prospects of avoiding recession hinge on the global battle against inflation, with an alarming new report highlighting the likelihood of a recession in 2023 or soon after.<\/p>\n<\/div>\n

Mr Bouris was on stage delivering this message when the Australian Bureau of Statistics released its latest retail sales figures, which were still rising, albeit less than last month\u2019s big uptick.<\/p>\n

Retail turnover rose 0.2 per cent in February 2023, which follows a 1.8 per cent rise in January.\u00a0The day after this speech was delivered, the ABS revealed the\u00a0Consumer Price Index had eased back to 6.8 per cent to end of February 2023, down from 7.4 per cent the previous month and the December peak of 8.4 per cent.<\/p>\n

\u201cRealistically, there is only one way to control inflation and that\u2019s to push us into recession.<\/p>\n

\u201cWhen that is the discussion, people will stop spending.<\/p>\n

\u201cWhen the recession hits we\u2019ll stop spending; the good news is if you know this, then there\u2019s an opportunity.<\/p>\n

\u201cAustralia\u2019s economic history is that these tightening periods and downturns, generally speaking, only last between nine and 15 months.<\/p>\n

\u201cMy gut feeling is that somewhere between here and June next year, we\u2019ll see one, two maybe more rate increases, and a recession \u2013 not something anything like the 1930s but the narrative will be scary enough to change behaviour.\u201d<\/p>\n

Westpac, he said, envisaged that from late 2024 there would be seven interest rates cuts.<\/p>\n

\u201cThat means the growth period will start again, so plan to knuckle down, tighten your belt and get ready for a tougher period, make sure you have access to funding, maintain cash, reduce your costs and get ready for things to kick up – and kick up fast – in late 2024.\u201d<\/p>\n<\/div>\n<\/div>\n<\/section>\n

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Article Q&A<\/h4>\n
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When will property prices rise again in Australia?<\/strong><\/h5>\n
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Speaking at the UDIA National Congress 2023, Mark Bouris, Chairman of Yellow Brick Road Group and one of Australia\u2019s foremost financial advisors predicted that by late 2024 interest rates would again be in decline, the inflation beast tamed and national property prices would respond by rising, and perhaps lifting rapidly.<\/p>\n<\/div>\n<\/div>\n

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Will Australia go into recession?<\/strong><\/h5>\n
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Speaking at the UDIA National Congress 2023, Mark Bouris, Chairman of Yellow Brick Road Group and one of Australia\u2019s foremost financial advisors, said the official cash rate would continue to rise in the fight against inflation, bringing with it the strong likelihood of recession in 2023.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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