Today’s move by the Finance Minister and the Reserve Bank on housing is an admission that the changes they made back in March to ‘fix’ the housing market are not working .
Tony Alexander’s survey out today shows two thirds of agents report that buyer FOMO is back, three out of five agents say prices are rising, and fewer agents say investors are selling.
The Government won’t admit publicly that the changes have failed, but if they had any confidence that their punishment of investors back in March was going to materially change things, they wouldn’t have needed to add more tools today.
So today they’ve signed a memorandum of understanding, potentially forcing retail banks to halve the proportion of mortgages to buyers with smaller deposits, and allowing the reserve bank to limit how much you can borrow compared to how much you earn.
Unless they put exemptions in place for first home buyers, this is going to hurt them. Because it’s first home buyers who have to take out those big mortgages, and its first home buyers generally who are on low pay compared to what they borrow.
I think this is a case of insanity, if you accept that the definition of insanity as doing the same thing and expecting a different result.
The Reserve Bank and the Finance Minister keep doing the same thing: they keep mucking around with the demand side of housing, trying to make it so hard for people to buy that they end up giving up, thus reducing demand.
Is there anyone in this country who thinks that’s going to fix the housing market? Anyone out there who now doesn’t understand that the problem is on the other side: supply.
We just don’t have enough houses. That’s why we have people living in motels.
They need to stop mucking around with the demand side, and start making it easier for people to build; bring in the timber, bring in the builders, free up the land.
If they really want to do something to help people get into houses, they need to build houses, not make it harder to buy a house. That’s insane.
This isn’t going to magic up houses, just like it didn’t in March.