Australian Bank Tells Distressed Property Investors to Sell

March 30, 2021 Updated: March 30, 2021

Commonwealth Bank of Australia (CBA) is encouraging distressed property investors to take advantage of the surging house prices and sell their properties.

Listing investment properties on the market is one of several options the bank is suggesting for customers who are unable to repay their home loans, according to The Australian.

“If you’re an investor, and you’ve got an investment property that’s causing you challenges, it’s been an opportunity to take advantage of the market and sell it,” CBA group executive for retail banking services Angus Sullivan told The Australian.

CBA will be keeping a close eye on any signs of financial distress from mortgage customers with the end of both JobKeeper and the home loan deferral scheme this month.

Customers in the most hard-hit sectors, such as tourism and travel, will be at the centre of the bank’s attention, Sullivan said.

“For customers in a position of more challenging hardship, we’ve got other, more bespoke, solutions in place for them, such as a period of ongoing extension or a freeze on repayments for a period of time,” Sullivan said. “Then there’s a slightly larger chunk of people who’ve all voluntarily chosen to exit their home. And then, obviously, there’s a very small number of deferrals still being worked through.”

The bank said 85 percent of home loan customers who were on deferrals are now back to their original payment plans.

Only 1.6 percent of CBA customers are still on home loan deferrals, while the others are making reduced repayments, on other payment plans, or electing to sell their properties.

The latest data from the Australian Banking Association (ABA) shows as of Feb. 28, the total outstanding repayments for home loan deferrals fell to 5 percent, relative to all deferred loans.

“Right at the height of COVID, when things were at their absolute worst, only 10 percent of Australian mortgage holders deferred the payments on those mortgages,” ABA CEO Anna Bligh told 2GB on March 3. “90 percent of those people are now back paying in full.”

Bligh told ABC radio that with both JobKeeper and the home loan deferral scheme ending within days of each other, “casualties” were going to be inevitable.

“I do think there will be some people who will have to face the very hard and painful decision of doing the right thing by selling when they still have equity and money that they can take out and keep their head above water,” Bligh said.

January data figures from The Australian Prudential Regulation Authority (APRA) indicated that most loan deferrals were from the state of Victoria, which endured longer periods of hard lockdowns.

“Victoria remains the state with the highest proportion of loans subject to deferral, at 2 per cent compared with the rest of the country at 1 per cent, though this difference is narrowing,” the APRA reported.

CBA will not yet be repossessing houses from distressed owner-occupiers, as the freeze on forced home sales is in place until September.