‘Crocodile tears': Home loan change could add to worsening housing crisis
It's now easier for Australians to buy a home, but a key change to credit limits could push up the price of housing, a leading economist warns.
The Australian Prudential Regulation Authority (APRA) announced on Thursday that Higher Education Loan Program (HELP) debts would be excluded from the credit limit for prospective homebuyers from September 30.
Independent economist Saul Eslake told NewsWire that the change's two most obvious effects would be to 'allow some people who'd buy a home anyway to buy a more expensive one and (to) allow some people who wouldn't have been able to buy a home because of their student debt' to do so'.
'The net effect of those two factors will be to increase the demand for housing,' he said.
'The likely result is that it will, along with other things that governments are doing, put further upward pressure on the prices of property.'
Mr Eslake said the change meant some people would be able to enter the housing market more quickly than otherwise but 'it would come at the expense of others'.
'The primary beneficiaries of this change will be those who will already own property will be able to sell it to people at higher prices than otherwise,' he said.
'That's consistent with the 60 years of evidence that we have, going back to the first homeowners grant scheme introduced by the Menzies government in 1964 that tells us that anything that allows Australians to pay more for housing than they'd be able to otherwise results in more expensive housing and a smaller proportion of the population owning it.'
Mr Eslake added it was 'obvious' the money saved on HELP debt cuts would now be going towards a more expensive house.
'The reason that governments keep doing these things despite the evidence and despite all of the crocodile tears they routinely share about the difficulties faced by would-be first-home buyers is because they know that there actually aren't very many of them,' Mr Eslake said.
'On average, 110,000 a year, whereas there are 11 million people who own their own home. There are 2¼ million who own at least one investment property. That's an awfully much bigger number of votes for policies that keep house prices going up than there are for policies that might restrain the rate at which house prices keep going up.'
Mr Eslake said the reason the housing crisis continued to worsen was 'because a majority of the population do not want it to be solved and politicians know that'.
'Until enough people my age, either out of an altruistic concern for the ability of their children and grandchildren to be able to do what they did, or perhaps more likely out of being pissed off at having to be the bank of mum and dad, until enough of them really want that to change, it isn't going to change.'
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