Fewer landlords, more owner-occupiers buying homes
A BATTLE has been won in the war for the soul of Australia. Landlording seems to be on the retreat.
Each month, banks gather together all their information on what loans are going to whom and for what. This is sent to the good people at the Bureau of Statistics, who publish it shortly after.
The latest publication is clear as day. The amount of lending going towards investor housing is finally in retreat, and the amount going to owner occupation is shooting up, as this next graph shows.
For a long time, first home buyers where being locked out of the market. The share of first home buyers fell below 13 per cent. But now, as the market is getting unlocked, they're surging back.
First home buyers are suddenly up to 16.6 per cent of the market, the highest level in about four years.
It is still a way off the average 22 per cent level that applied in the 1990s, but it seems finally young people are clawing their way back in.
One factor is house prices. They have eased a lot in Perth as the mining boom ended. More recently, even in Sydney the pressure has finally come off.
The government can take some credit for that latter move. It forced banks to offer higher interest rates to investors and anyone who was just paying off the interest.
As you can see in the next graph, a big gap has opened up between the interest rate you pay as an owner-occupier and the interest rate you pay as an investor. The gap is even bigger if you have an interest-only mortgage.
To be clear, these changes are made by the prudential regulator, which is independent, so our Treasurer Scott Morrison can't take all the credit.
Fiddling with the rules around bank lending is part of what they call prudential regulation. You can see the word prudent sitting in the name and that's exactly what this is. Giving different lenders different interest rates makes speculating on property less attractive.
That not only makes the market more accessible to first home buyers, but also, by reducing the amount of hot money that can move in and out, makes the market a touch safer and slightly less prone to a crash. The only question is why banks themselves didn't do it, and a long time ago.
A future where home ownership is out of reach is not one I'd like to live in. I don't own my own home for now, but I'd like to one day. It is not in anyone's interest to see house prices rise up to bubble levels and then crush the economy when they fall.
For a while it seemed like Australia was on the verge of a splitting along property lines. There were those who held land and those who had to pay to use it.
But not everyone can be a landlord, or there'd be nobody to rent property to.
The ultimate symptom of the dystopia was the risk-blind youth who showed up in those property portfolio stories, holding tiny scraps of equity in sixteen crappy units on the fringes of town (and living with mum and dad).
The rise in the cost of investor loans is no doubt making their lives harder, but it should make owner occupation more achievable for the rest of us.