At an industry roundtable led by Michael Sukkar, Minister for Housing and Assistant Treasurer, and centred around how access to finance can be improved to allow more first home buyers into the property market, the Housing Industry Association (HIA) proved a vocal and adamant proponent of the need for further credit reform.
HIA chief economist Tim Reardon provided the context to the group’s strong stance.
“Access to finance has tightened over the past two years, despite evidence of a problem. This constraint on finance was the key cause of a decline in the volume of homebuilding by almost 20% in 2018,” he said.
Reardon added that in the same year, the timeframe taken for processing loan applications swelled from two weeks to two months.
“First homebuyers have been forced to delay their entry into the housing market as additional barriers to lending were introduced,” he continued.
“This is despite evidence that lending for a residential mortgage is anything other than ‘unquestionably strong’.”
To Reardon, it is clear banks should be responsible for determining the capacity of a household to service a mortgage, not the government.
“Since the Global Financial Crisis, there has been a decade long program of reforms in the pursuit of an ‘unquestionably strong’ financial system,” he said.
“This ‘belt and braces’ approach to regulation has reduced risk in the financial system but it has come at a cost to first time home buyers.
“The regulatory squeeze has forced the banking sector to eliminate much of the flexibility in the mortgage market that made home ownership achievable and has prevented many aspiring homeowners from entering the market.”
Additionally, rectifying the situation has taken on a heightened importance in light of the events of the past year, the economist explained.
“Improving access to credit for small businesses and households will contribute to a swift recovery from the COVID-19 recession,” Reardon said.
“[New] legislation will begin to restore a degree of flexibility in the lending market that will allow millions of dollars to be injected into the economy at a time when Australia needs it most.”
