Last week we detailed five residential property market drivers and how they were moving through Covid. Two of them were;
- The availability of finance, and
- How much deposit someone has.
Governments (or their authorities) can impact the property market with policies designed to either stimulate or dampen the market but you don’t often see two different announcements pulling in opposite directions.
Last week APRA (which is an independent Federal Govt authority) advised lenders to increase their loan serviceability margin or buffer from 2.5% to 3.0%. This margin is the additional percentage a lender needs to add to its product loan rate before assessing a borrowers serviceability. It is designed to counter the rising risks in home lending and will therefore reduce the availability of credit (point 1 above) and temper the market by a small margin.
At the same time the Victoria State Government entered the property market with a $500 million Homebuyer Fund to assist first home buyers by providing 25% free finance (in the form of an equity stake) and enabling a minimum 5% deposit on purchases up to $950,000 (Melb & Geelong). Numerous other criteria apply such as income thresholds and ongoing monitoring, but this measure will stimulate the first home buyer sector (improving both points 1 and 2 above). A lot of apartment buyers are first home buyers which makes the Homebuyer fund good news for both buyers and sellers in the apartment market.
Therefore (admittedly in different ways and for different sectors) the State and Federal Governments (or their authorities) are both stimulating and dampening the residential property market at the same time.
Assisting first home buyers enter the property market is important, but if the government takes a 25% equity share in the property, it leaves the owner with only 75% of the capital gain, so from a longer term perspective it really just kicks the housing affordability can down the road. Or 75% of the can maybe…