The debate on what drives housing affordability in Australia is a hot topic for state and federal governments.
The property boom led to decreasing housing affordability and the significant build-up of household debt, triggering APRA’s restrictions on investor and interest-only mortgage lending.
And as a result of the tighter lending environment, Entourage Finance director Damien Roylance believes Australia is facing a credit crisis.
“It’s significantly harder to get funds at the moment with changes to investor loans, interest-only loans and servicing restrictions, and the effects are starting to show with the auction clearance rates,” Roylance said.
The latest ABS housing lending statistics released last week reveal the total number of new owner-occupier loans fell to the lowest figure since October 2016, while investor lending plummeted by 27.4 per cent since 2015, down 15 per cent for the past year.
When applied in theory, the regulations make sense explains Marshall White Projects Director Leonard Teplin.
“What needed to happen was a steady, measured approach to introducing new regulations where each outcome could be evaluated over time, to ensure the pendulum didn’t swing too far in the other direction,” Teplin said.
“The government and APRA had good intentions when they tightened lending and restricted investment loans, however no investors means less rental supply, which pushes rents up, making it even harder for people to try to save up their first deposit.”
Principal economist at the Housing Industry Australia Tim Reardon blamed punitive restrictions on the tumble in investor lending.
“The federal government targeted investors with two successive interventions in the market through APRA and state governments introduced punitive rates of stamp duty on foreign investors,” he said.
Related reading: Incentives for Developers Could Help Create More Affordable Housing
Related reading: Buying a House is Finally Getting More Affordable
Metro Property state manager David Steele said developers are also struggling to gain finance.
“Credit has been harder to obtain for both developers and buyers, a two-fold problem that will no doubt see residential prices surge and buyers struggle to move in the market,” Steele said.
“I understand the reasons for the APRA interventions, however the changes have gone too far and produced unintended consequences that will see our economy and our housing market head even further in a damaging direction.”
By introducing measures that discourage investors into the market, Qualitas senior director of real estate finance Gil Norwood believes the government has inadvertently decreased the amount of rental supply available.
“Developers should be incentivised by the government to deliver affordable housing and more flexible living arrangements via an offset to existing local and state levies, which would result in better outcomes for the market and keep price growth at an equilibrium,” Norwood said.
“At this rate, buyer activity will continue to remain subdued as it becomes almost impossible for Australians to pay exorbitant rent and save up for a house deposit at the same time.”
It’s not all bad news, a recent housing affordability report released by Moody’s said Australia’s housing affordability is the best in 10 years, and will continue to improve for the remainder of 2018.