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Lending The AFR reported that December’s 4.4% increase in new mortgage commitments is the biggest monthly gain since 2016. First-home buyer loans and investor loans rose significantly, showing that the outlook for housing credit could be strong this year. The value of owner-occupier lending was up 17.9% year on year but up just 3.5% on volume. This may result in the market beginning to see affordability problems – “this is consistent with financing conditions having eased for a subset or potential borrowers, boosting average loan sizes (and house prices), rather than a broad easing of conditions for all borrowers.”(Home loans growing at fastest pace in three years – Michael Bleby, 11/02/20) The Age also reported that, according to the ABS, the average mortgage of existing dwellings has hit an all-time high of $621,500. This increased 22.2% in 2019 or $112,600, over 12 months. In a parliamentary committee meeting last week, RBA governor Philip Lowe said that the nation may see broader economic problems if people continually borrow more to buy a home. (Average mortgage hits $500,000 as interest rates super-charge property market – Shane Wright, 11/02/20) Land Tax Reform In The Age, senior economics writer Jessica Irvine introduced a conversation around land tax reform, after the residential market’s boom in 2019. She argues that the economy is no longer at risk, Australia’s housing conversation should swivel towards affordability and look at how younger generations will afford housing for themselves and their families. In this process, Irvine argues that stamp duty creates another barrier and more debt for first-home buyers, and also discourages older Australians to downsize. She suggests that instead of the one-off payment, we introduce a broad-based and ongoing annual land tax. (Abolish stamp duty – impose a proper land tax instead – Jessica Irvine, 12/02/20)
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