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Peak real estate bodies have welcomed the Senate’s recommendations to improve financial regulation for first home buyers but have stressed that further reforms are needed to “truly address the declining rates of home ownership”.
In its final report into the impact on Australia’s financial regulatory framework on home ownership, the Senate recommended that a balanced approach be struck between the Australian Prudential Regulation Authority’s (APRA) regulatory duties and facilitating credit access to support home ownership.
This inquiry was launched in August of this year by the Senate economic references committee under Senator Andrew Bragg, who set out to examine strategies to lower lending costs and improve accessibility for first home buyers while focusing on “people, not institutions”.
Informed by industry feedback gathered during public hearings, the Senate’s final report issued a series of recommendations including providing ARPA with a new statement of expectations, which would require the regulator to consider the “long-term benefits of widespread home ownership” when setting prudential standards.
Following recent calls to reconsider APRA’s lending rules amid persistently high interest rates, the report also recommended that the regulator develop guidelines for a “lower first home serviceability buffer” that could adjust to economic conditions, while maintaining financial stability within APRA’s prudential standards.
Commenting on the release of the final report, the Property Council of Australia welcomed the recommendation to strike a “sensible balance between the Australian Prudential Regulation Authority’s regulatory functions and enabling access to credit to support home ownership”.
“APRA should be entrusted to consider home ownership, particularly for first home buyers, when setting robust regulatory frameworks. Balance and flexibility to adapt settings and respond to changing economic conditions are essential,” Property Council CEO, Mike Zorbas, said.
While the Housing Industry Association (HIA) welcomed the final report’s recommendations to provide greater support for first home buyers, HIA senior economist Matt King stressed that “broader reforms are necessary if we are to truly address the declining rates of home ownership”.
Unpacking this reduction in home ownership, King noted that home ownership rates have “declined significantly” over the last two decades, with the percentage of Australian households that own their own home with or without a mortgage decreasing from 71 per cent to 66 per cent.
“In APRA’s quest for an unquestionably strong banking and financial sector, first home buyers and other would-be home buyers have been forgotten and have been increasingly pushed out of home ownership through excessive regulation,” King said.
King highlighted recent findings from the Reserve Bank of Australia showing “0.8 per cent of all first home buyers are 90+ days in arrears” as being “extraordinarily low”, and said this data was representative of APRA’s “misreading of the capacity of Australian borrowers to service their debts, even in the midst of a cost-of-living crisis”.
“Despite prolonged significant budgetary challenges, the vast majority of first home buyers are keeping their mortgage repayments on track. Yet there are many more potential first home buyers currently in the rental market who deserve the chance to secure a home loan and purchase their first home,” the economist said.
Moving forward, King said that ensuring home ownership “remains an attainable aspiration for Australian households is an equally important objective to financial system strength”, and emphasised that a “revised APRA mandate should reflect this”.
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