Regulators at risk of 'overstating' spruiker epidemic: Westpac

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Regulators are at risk of overstating the problems surrounding SMSF property advice and ‘spruiking’, according to the head of Westpac’s SMSF trustee division, Sinclair Taylor.

Speaking at the SMSF Professionals’ Association of Australia (SPAA) national conference earlier this week, Taylor noted that the SMSF loan market is worth $6-7 billion, with around 30,000 funds borrowing to buy property – and that the vast majority of transactions are legitimate.

As reported by WP's sister publication Australian Broker, ASIC chairman, Greg Medcraft, dubbed SMSFs a ‘fragile’ zone last week and says the sector’s growth will be the ‘greatest challenge in the next decade’.

“Frankly, making sure those investors can be confident and, more importantly, that they are informed, is absolutely critical,” he told reporters.

However, despite ASIC’s on-going concerns, Taylor says he expects demand to increase.

"As cash rates come off and equities remain volatile, a lot of trustees are looking for the security of property. That is what they tell us when they come in to talk about a loan.”

Furthermore, he says Westpac insists on working with brokers and trustees to ensure they understand the complexities of the process before going ahead and that most lenders provide only ‘vanilla’ loans.

"We lend on residential and general commercial property. The assets must be a going concern. We do not lend on anything like agricultural property."

Westpac and St George have a combined SMSF loan book of around $2 billion, giving them a significant market share. The group's average loan size sits at around $300,000 and the maximum loan-to-valuation ratio is 80%.

"We are also seeing more brokers selling the product,” says Taylor. “There is very strong growth in applications from mortgage brokers."

  • Wayne Slager, Real Property Advice on 25/07/2013 10:24:46 AM

    Paul, I share your disappointment but I suspect that you well know the answer to your question is that banks, and anyone else with institutionalized thinking - whether they be in a large or small organisation, is quite content to let people make such mistakes.

    They are not trained to think beyond their immediate area of responsibility, and fear the repercussions of doing so, are not holistic or client-orientated and certainly don't want to threaten the sale of services or product due to pressure to produce results, keep their job and earn an income. How sad for all involved.

  • Paul Resnik on 25/07/2013 9:46:04 AM

    There is something terribly dispiriting hearing from another disinterested 'supply chain participant' voice an opinion on lending for property in SMSFs. Just because someone wants to do something stupid doesn't mean you should allow them to do it, does it?

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