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First home buyers have been forced to delay their entry into the housing market over the past two years at least, as additional barriers to lending have come into play, an economist has flagged.
Tim Reardon is the chief economist at the Housing Industry Association (HIA), and he believes there’s plenty of evidence to suggest problems with access to finance for first home buyers.
With access to finance having tightened, Mr Reardon said such a constraint “was the key cause of a decline in the volume of home building by almost 20 per cent in 2018”.
“The time frame taken for processing loan applications in 2018 grew from two weeks to two months,” he highlighted.
The result? “First home buyers have been forced to delay their entry into the housing market as additional barriers to lending were introduced,” the economist said.
He said this is despite evidence that lending for a residential mortgage is anything other than “unquestionably strong”.
From Mr Reardon’s perspective, banks should be responsible for determining the capacity of a household to service a mortgage, and not government agencies.
He believes improved access to credit for small businesses and households will contribute to a swift recovery from the COVID-19 recession.
“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.
While the “belt and braces” approach to regulation may have reduced risk in the financial system, Mr Reardon argued 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 home owners from entering the market.
“The legislation [the repealing of responsible lending laws] 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.”
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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