Senate Economics Legislation Committee, , 1:17:27 to 1:23:29
Analysis of how interest rate hikes and tax reforms are shifting lending patterns, with a focus on the difference between existing dwelling purchases and new construction.
Topics: Infrastructure, Government spending
Speakers: Jenny Wilkinson, Senator Andrew Bragg, Hon Katy Gallagher, Unknown Speaker
Oh so I was going to say, Senator, in the budget papers, um there's a box. I can't remember exactly what box it is, which outlined our analysis of the tax reforms and the and the budget overall. Our overall assessment, and as I said in my opening statement, you do have to think uh differently about kind of what the structural versus the cyclical drivers of changes in the housing market are.
Yeah.
For the most part, the cyclical changes that we're seeing in the housing market, that that is what you would expect from having had four increases in interest rates over the course of this year. Um so the the m the most significant impact, and I certainly I'm pretty sure that most private economists uh are also of this view that the most significant impact that we're seeing in the housing market is the consequence of increases in interest rates because we have a a um a uh uh because housing investments in Australia is typically funded through variable rates. So for the most part, the housing cycle is uh interest rates. Is there an impact of taxes? As I said in my opening statement, yeah, I think that there would be some impact of that. But the modelling that we did for the purposes of the budget was trying to understand what the structural impact of those changes would be and the net impact of those changes, plus the local infrastructure fund was that there would be additional housing supply in the budget.
So you're saying some impact fine. So in terms of the price impacts on people who've taken out 95 per cent loans, there's been 100,000 in the last year that have taken out 95 per cent loans underwritten by the the government. Um a lot of those people would now be living in some of those suburbs, mainly in Melbourne and Sydney that uh have gone down by more than 5%. Um how many people do you think are in negative equity today?
So, Senator, I think you can talk to the RBA about this when they come in, they address this in the financial stability review, which was recently released. Um what we know from the 5% deposit scheme is that 99.7% of participants in that scheme are either ahead or on schedule with their payments. Umly 0.3% of participant households are in uh more than 90 days of arrears. Uh and uh that's actually a lower proportion than uh in all housing loans.
Okay. Well, look, I think before I get the wind up, um, what I wanted to ask you about is you talked about the recalibration of the housing market. I've heard the Treasurer and the Finance Minister talk about I think it's code for we we effectively want there to be more owner occupiers. But what we've seen since the budget is reduced lending to owner occupiers. So who do these taxes help?
So, Senator, what we've actually seen since the budget, and we've at this stage only got so the most forwarded forward indicator of activity in the housing market is the lending data. And what we see from the lending data is that actually within the investor community, there has been a wind back in lending for existing dwellings.
To own occupiers and investors.
Sorry, I'm talking about the lendings. So I'm talking about investors, first of all. That there has been a wind back in lending to investors for the purchase of existing dwellings. That fell by about 13% in the June quarter. On the other hand, the lending to investors for the construction of new dwellings or lending to investors for the purchase of newly electric elected newly erected dwellings, both rose by about 6.5% in the June quarter and were nearly 26% higher over the year. So that's the earliest indicator or in the June quarter indicator of what was happening in the investor market. In the owner-occupier market, there has been a fall in new loan commitments, the value of new loan commitments to owner-occupiers. In fact, the fall has been greater for non-home dwell non-first home dwell non-first home buyers than for first home buyers. For first-home buyers, the value was roughly flat in the June quarter, and it's still up 10% over the year.
So who does it help? It's not quite in the if if investors have been pushed out of the market and therefore dwelling investment is actually going but going down. And then there are fewer loans to owner occupiers. Who are these taxes actually going to help?
Well, that's that's not the evidence that you've just heard. No. There's been a change in the investment category from owner-occupier to new erect electrons, sorry, new construction essentially, new bills.
Well, that that's we're talking about sorry, we're talking about different things, Minister. I'm asking about loans to owner occupiers, right? Now, if the stated aim of your tax changes was to give more owner occupiers, it's failed because every major bank is saying lending to owner occupiers is down, and that's the evidence we just heard from your secretary.
But Senator, sorry, that's just so I guess we're trying to distinguish between what's happening in a because of the cycle and what's happening in terms of the structural changes. What I'm saying is when I look at the investors and I look at the different difference of their behaviour between existing dwellings and new dwellings, the the investor behaviour based on the loan commitments data that we have to date suggests that there's been a shift, a reasonably significant shift towards new new newly constructed dwellings. Yes, and that's because sorry, Senator But Senator, that's because there is a downturn in the housing market. That's that's the ration. And I said that the the I think I was clear in my opening statement.
Thank you.