Macquarie Group (ASX: MQG) has raised its shareholding in the Mark Bouris-backed Yellow Brick Road (ASX: YBR) from 8.3% to 10.5%. Macquarie, which has to a degree been ‘lost in the wilderness’ since the GFC due to merger and acquisition deal revenue drying up and the end of the infrastructure management fee model the bank was renowned for, has identified the home loan market as a space it wants a bigger slice of as it repositions itself for a post-GFC world.
Not only are the banks watching Macquarie’s moves with interest but also the mortgage brokers such as Mortgage Choice (ASX: MOC) and Homeloans (ASX: HOM) in which Macquarie already has a 20% stake.
Macquarie’s move comes at a time when RP Data is reporting that 12.7% of home sales in Australia were conducted at a loss in the March quarter of 2013. Queensland, NSW and WA bore the brunt of loss making re-sales, with units in Queensland experiencing the highest losses with 37% transacted at a lower price than what the unit was purchased for previously.
Perhaps proving the chips are stacked in the long term investors’ favour not just in equities but also in property Mr Lawless from RP Data commented that:
“The likelihood of making a profit or loss is quite different based on the length of time a property has been owned. As a stark example, those homes that were previously purchased prior to January 1st, 2008 (pre-GFC) and were subsequently sold during the March quarter this year, only 8 per cent of re-sales were made at a gross loss. For those homes that were purchased on, or after January 1st 2008, the propensity to make a loss on the sale climbs substantially. Of those homes sold over the March quarter, 25 per cent recorded a gross loss relative to the previous purchase price.”
While resale profits far outstrip resale losses it is still concerning, particularly when considering the economic headwinds Australia is facing. Given the overtly high proportion of losses experienced in Queensland, bank investors will want to assure themselves of their banks exposure to these weaker regions.
While the majority of market commentators believe that all is well with property prices in Australia, the case for overpricing is convincing too. Australian banks have significant exposure to house prices through their mortgage books, making developments in the property market important to understand for any owners of bank shares.
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