Investors storm back into housing market, elbowing out first home buyers

Investors have roared back into the housing market, buying properties that would have otherwise gone to owner-occupiers, and embarrassing the government by taking out more than half of the new money meant for housing.

The latest figures for January mark the first time the share of loans taken out by investors has climbed back above 50 per cent since strong action by the Australian Prudential Regulation Authority in 2015 to curb bank lending to would-be landlords and negative gearers.

The surge in investors entering the housing market and squeezing out owner-occupiers comes as the Turnbull government prepares a housing affordability package for the May budget that will aim to make entry into the market easier for first home buyers, while also addressing rising rents that are squeezing people out at the bottom of the market.

Treasurer Scott Morrison on Friday confirmed Fairfax Media's report that the Coalition is looking to create a new Affordable Housing Finance Corporation (AHFC) that, using a "bond aggregator" model, would stimulate tens of millions of dollars of new private-sector investment in community housing.

An AHFC would provide longer-term, lower-rate loans for community rental housing, backed by the Commonwealth balance sheet, but at no cost to taxpayers.

Mr Morrison highlighted the success of similar bodies in places such as Britain and said it offered part of the solution to supplying affordable rental housing.

"In the housing debate, we rightly focus a lot on first home buyers and the real challenges that they have in getting into the market. But one of the things that has been concerning me now for some time is the growing number of people on low incomes who are facing rental stress," he said.

Community Housing groups and the federal opposition welcomed the government's focus on affordable rental housing, though Labor leader Bill Shorten said the Coalition should also deal with the "elephant in the room and that is the unsustainable tax concessions of negative gearing and capital gains tax discounts".

The 2015 APRA measures pushed the share loans taken out by investors down from 53 to 44 per cent.

Mr Morrison praised the measures as recently as last month, saying APRA "took action to curb the growth in investor lending and we did see a dramatic reduction in the growth of investor lending as a result of that".

But the figures show the proportion of investor lending has been climbing for 14 months, hitting 48.88 in December and a post-cutback high of 50.28 per cent in January.

The number of loans to first home buyers slipped from 7707 to 6134 in January, a slide of from 13.8 to 13.4 per cent.

Commonwealth Bank economist John Peters warned the "housing finance figures will not be music to the Reserve Bank's ears . . . indeed, against the backdrop of the weakest wages growth in two decades at present, with real wages growth getting close to zero, rejuvenated investor activity will only exacerbate the Bank's concerns about the level of household debt relative to incomes."

Banks are understood to have at first tightened their lending criteria for property investors, then loosened it in a bid to lure customers from other banks.

Over the past year, lending to investors has jumped 27 per cent, up from an annual growth rate of 10 per cent a few months ago. They jumped 4.2 per cent in January. The growth was centred on Sydney and Melbourne.

Meanwhile, Unisuper super fund chairman Chris Cuffe has also urged the government to wind back the generous 50 per cent discount on capital gains tax available to property investors.

As Labor also argues for changes to the CGT, an internal debate is under way in the Coalition about whether to scale back the concession.

Mr Morrison, a proponent of reducing them, again left the door open to such a move in the May budget on Friday.

Finance Minister Mathias Cormann, on the other hand, has publicly argued for no change to the CGT rate.

Labor went to the last election promising to cut the discount for newly-purchased assets to 25 per cent, from the current rate of 50 per cent.

The Parliamentary Budget Office concluded that cutting it 25 per cent would save the budget $5.7 billion over four years. Cutting it to 40 per cent would save $2.3 billion.

SMH /March 10 2017

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