With investor loans now making up more than 40% of new lending each month and SMSF borrowing for property purchases more than tripling in the past two years, the debate is raging on the impact investor activity is having on housing affordability in Australia.
The distortions are now getting so great that one of Australia’s senior bankers has himself raised concerns about the “irrational obsession” with property buying and negative gearing in Australia.
Phil Chronican, ANZ’s CEO of its Australian operations, told Fairfax he understands the RBA’s concerns about investment loans and has joined Glenn Stevens and others at the RBA in warning that property is not a one-way bet.
“I do worry that some people behave as if housing is always a one-way bet. I think there is a bit of an irrational obsession with housing as an investment class. I agree with that. For many investors, they would be better off in assets other than housing,” he said.
Chronican noted that the “tax distortion” of negative gearing was a big driver of the love affair. “From a community awareness viewpoint, I think there should be more debate around the strengths and weaknesses of housing as an investment class. Australia would benefit from having a very rational debate about the role that housing as an investment class should and shouldn’t play,” he said.
The clamour to curb investor buying in housing has been growing recently and the RBA has been talking publicly about the potential use of so-called macroprudential tools. These tools would place restrictions on certain types of lending, and could also potentially include SMSF leverage, more often used for property, being banned as flagged in the Murray Inquiry’s interim report. They’re seen as a way to ensure boom doesn’t lead to bust, and so destabilise Australia’s financial system or economy.
But the policy options aside, this is still an enormous step for a senior banker to take when a large part of his business is the business of home loan lending. The cynics might argue this is a last gasp to show the Murray enquiry, finalising its recommendations to be given to the Treasurer this month, that he and the ANZ are concerned about property speculation and thus don’t need to have new rules imposed on them.
More likely however Chronican is just doing what bankers do and showing genuine concern about an area which, if it becomes unstable, could have a material negative impact on his business.
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