Why?
1. The residential property market generates more economic and employment multipliers than any other industry, e.g. furniture, white goods, landscaping, floor coverings, and most of all the trades (carpentry, plumbing, electrical, bricklaying, roof fixing and finance/banking).
2. Banks who are currently restricting lending on property will inevitably return to the mortgage market because this is the lowest risk and most profitable form of lending (lending margins are currently 3%). Capital required for lending will come from share issues and increasing retail deposits emanating from the Government deposit guarantee.
3. Record population growth should continue underpinning housing demand.
When?
The return to normal mortgage lending levels and development funding will take up to 18 months. This is the time it should take for the banks to re-capitalise their losses and maintain their capital adequacy ratios without the need to cut lending.
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