How the Banking Royal Commission Will Affect Property Investment in Australia

Dominique Grubisa
Dominique Grubisa

Published 4:36 am 6 Jun 2018

Facebook Twitter Pintrest Linkedin Google Plus

The shocking revelations at the banking royal commission mean getting finance could soon become far harder. DGI Founder, Dominique Grubisa, offers her take on how the commission will affect property investment in Australia.

If you’ve been following the banking royal commission, you’ll know that it’s produced evidence of all sorts of deception, fraud and bad behaviour by the banks. And some of the most disturbing evidence has been around so-called ‘liar loans’ – mortgages given to people based on poor or false estimates of their ability to repay. In order to win business, banks and their agents have granted loans to people who simply can’t afford them.

And we’re not just talking about one or two loans here – research suggests up to one third of Australian mortgage holders were given loans based on false information. That’s $500 billion in loans.

→ Free Distressed Property List : Find Property Up to 10-40% Below Market Value

While the royal commission’s findings are still at least a year away, the issue of liar loans is likely to have major repercussions, not just for the people who will inevitably miss their repayments but for the whole housing market. The good news is if you act now, you can take some simple steps to secure your own financial situation and prepare yourself for the fall-out from the commission.

How the royal commission will slow down property investment in Australia

So, what’s the big problem with liar loans? It all comes back to the state of the wider economy. At the moment in Australia, the housing market is too hot in places like Sydney and Melbourne. With interest rates at a record low, lots of people have been investing in property, driving up prices.

Fixing this affordability problem isn’t as simple as putting up interest rates. The Reserve Bank of Australia which sets the official cash rate doesn’t want to put it up because that would hurt other areas of the economy, like retail. So, instead the Federal Government is working to cool the housing market through the banking regulator, the Australian Prudential Regulation Authority (APRA).

Because much of the lending that has been going on has been to investors, APRA has recently been making it harder for them to borrow. Banks have been forced to introduce strict limits on what proportion of loans can go to investors and have also been encouraged to dramatically scale back on their interest-only products. These are loans that allow borrowers to avoid paying back the principal on a loan – and to have far lower repayments – usually for a period of five years.

Meanwhile, out of shame, the banks are also moving independently to lift the proof they require for owner-occupier loans. Expect them in future to demand your tax returns before they hand over a cent. Here’s where the liar loans become a problem. As investors and homeowners come to the end of their interest-only, low-repayment periods over the next few years, they will need to refinance.

Many of them simply won’t be able to because they shouldn’t have been granted a loan in the first place and the interest-only loans have dried up. Combine this with an interest rate rise down the track and lots of people are likely to be forced to sell, pushing down prices and eventually slowing down the current rhythm of property investment in Australia — as it happened in America after the GFC.  

The fall-out for you

What does this all mean for you or anyone engaged in property investment in Australia? You’ll want to put yourself in the strongest position possible to both service your loan and get another one down the track should you need to.

One way of doing this is by getting your accounts in the best order they possibly can be to pass the more stringent loan-application processes.

An excellent way to do this is by having an accountant familiar with lenders and who is up to date with all the changes. You’ll also want to put yourself in the best financial position by paying down the principal of your home loan sooner and increasing your negative gearing potential. DG Institute is one of the few places in Australia where you can access Loan Controller, a product with an ATO ruling that can improve your tax efficiency. In essence, it allows you to obtain the maximum discount possible on your home loan and optimise the tax benefits of your investment. Depending on your situation, it could dramatically improve your bottom line.

So, don’t panic. While there are changes afoot and it’s likely many people will feel mortgage stress, with the right strategies you can keep on track to achieve your financial goals.

Distressed Property

Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

Our Happy Clients

  • Shane Beard

    "I originally joined DG Institute because I was very interested in doing property development for myself. Like any venture, there has been lows. One of my first deals was a small development where I had just left my full time job. My money partner had sold the property without telling me, which left me back at […]"

    Shane Beard, Property Uplift Graduate

  • Michael Nichols

    "Would i recommend Elite Mentoring? Absolutely. You can reinvent the wheel, what you want to achieve in 2-3 years, you can achieve in 3-6 months with an Elite Mentoring coach."

    Michael Nichols, Elite Mentoring Graduate

  • Larisha Engelbrecht

    "Larisha is a Real Estate Rescue DGI graduate and a member of the Elite Mentoring community. Her biggest learnings as a graduate were gaining a deeper understanding of how to deal with her mindset as well as the mindsets of other homeowners. With this knowledge, she was able to overcome barriers and the softer skills […]"

    Larisha Engelbrecht, Real Estate Rescue Graduate

  • Andrew Canning

    "We bought a distressed property, which was a hoarders home, in NSW.  In 8 weeks we have stripped it, overhauled in with a new kitchen and flooring. It will be a 14-week turnaround with a projected profit of $90k the most learnings i’ve had is my self-confidence. The emotional intelligence I’ve gained is what’s most […]"

    Andrew Canning, Elite Mentoring Graduate

Recent Blog Post

Your COVID 19 tax return: optimise your home-office refund

Your COVID 19 tax return: optimise your home-office refund

View Post
The Complete Guide To Property Development

The Complete Guide To Property Development

View Post
What is a recession and how will it affect me?

What is a recession and how will it affect me?

View Post
The China and Australia Trade war could burn our Coronavirus recovery

The China and Australia Trade war could burn our Coronavirus recovery

View Post
Be prepared for the COVID-19 housing slump

Be prepared for the COVID-19 housing slump

View Post

Breakthrough Success Livestream

Discover How To Protect Your Assets, Secure Your Financial Future And Set Yourself Up For Success