Many investors think the Big 4 banks like Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) are quite risky, due to their high reliance on home loans and elevated prices in the Australian market.
However, if you're avoiding the Big 4 banks because you think the housing market is overheated, there are plenty of other companies that could be worth steering clear of. Here are 3 of the riskiest, in my opinion:
Genworth Mortgage Insurance Australia (ASX: GMA)
Genworth is a company that investors should be majorly wary of if they think that the housing market has become too risky. As a provider of lenders mortgage insurance, Genworth could be on the hook for reimbursing billions of dollars of losses if the housing market collapses. Not only that, but if housing sale/purchase activity declines (or lending standards tighten), Genworths' income falls because it will be writing fewer insurance policies.
Yellow Brick Road Holdings Ltd (ASX: YBR)
Along with other mortgage brokers and non-bank lenders like Homeloans Limited (ASX: HOM), Yellow Brick Road could expect to see a significant decline in its ability to write loans and earn commissions. The company also has a wealth management offering, but it appears its market-leading low-cost loans are the primary driver of both revenues and attracting new customers.
Nick Scali Limited (ASX: NCK)
Furniture retailers like Nick Scali Limited (ASX: NCK) and Harvey Norman Holdings Limited (ASX: HVN) could also be ones to watch, with their sales being an indirect beneficiary of the housing boom, as new construction led to huge growth in demand for furnishings.
