Oliver Hume Property Group CEO Julian Coppini has welcomed the Coalition’s idea of lowering the serviceability buffer for first home buyers, saying it could make a meaningful difference for young Australians struggling to enter the housing market.
“Lowering the serviceability buffer for first home buyers will have a significant and positive impact on the affordability of new homes and reignite the dream of home ownership for thousands of young Australians,” Mr Coppini said.
“A serviceability buffer of 3% was set as an emergency measure when interest rates were close to zero. That current level of buffer has no correlation to current interest rates and is only serving to lock young buyers out of the market as prices rise.”
Mr Coppini said the buffer, in its current form, was no longer serving its original purpose and was limiting the borrowing capacity of households, even as interest rates begin to soften.
“We have always maintained, (and advocated) that the current buffer is overly cautious and penalises first home buyers particularly and welcomes policies by any political party to review the level and operation of the serviceability buffer and for APRA to consider its rules in the context of access to housing for lower income Australians.”
Lowering the buffer will help get first home buyers to get on the property ladder and overcomes one of the major hurdles impacting affordability.
As interest rates have risen the buffer has risen, making it significantly harder for first home buyers to get a loan and it is no longer fit for purpose.
“If the buffer was at the right level and well-calibrated, it should show a substantial increase in defaults if the mortgage rate rose more than the level it was set at. Mortgage rates have moved significantly more than the buffer and there has been no significant increase in mortgage arrears. Additionally, there are good arguments to remove the buffer for fixed rate mortgages and make the buffer counter-cyclical.”
According to research from Oliver Hume, even if interest rates drop by a full percentage point over the next 12 months, the average buyer will still be unable to afford a standard house and land package.
“Households on an income of $120,000 will still only create a borrowing capacity of approximately $650,000 if the variable lending mortgage rate falls from 6.6% today to 5.6%,” Mr Coppini said.
“Without deeper cuts to interest rates or a major overhaul of serviceability buffers the affordability crisis will roll on and more young people will be locked out of the great Australian dream.”
Meanwhile, Property Council of Australia Chief Executive Mike Zorbas has welcomed the Coalition’s proposal to establish a dedicated office, Investment Australia, aimed at cutting red tape and attracting more foreign capital into construction and other key sectors.
“Australia competes for global capital and institutional investors seeking stable, risk-adjusted returns,” Mr Zorbas said.
“Fast-tracking overseas investment in non-sensitive property projects is a no-brainer.
“The smart move is to build our cities with other people’s money.”
Mr Zorbas pointed to Australia’s long history of using global capital to fund urban development.
“Australian cities have been built using other people’s money for 80 years – leaving positive and permanent city assets including offices, apartments, master planned communities, data centres and industrial hubs.
“If a future with more investment is our goal, we need to remove federal red tape and shrink state taxes that repel harmless institutional money from overseas,” he said.
The comments from both leaders come amid renewed national debate around housing affordability, and the need to both increase supply and improve access to finance for would-be buyers.
