Decoding Australia's Property Paradox: Looking Beyond Statistics

This week the Urban Developer published an article titled “Investor Home Loan Values Soar 21pc for Year” with ABS head of finance statistics Mish Tan quoted saying the value of new investor loans in February was 21.5 per cent higher compared to a year ago.

They report this notable uptick in home loans as signalling a potential surge in the property market. However, a closer examination reveals a concerning trend: this increase isn’t reflective of historical patterns, nor is it necessarily addressing the fundamental issue of housing affordability. This upswing is coming from a low base point when investors were penalised out of the market.

Traditionally, (pre-2015) the percentage of investor loans was around 33% of total loan values. That amount wasn’t quite enough which created this gradual undersupply of rental properties.  When the investor lending rate jumped to a little over 40% in 2015, and their view of the ‘surge’ in the Sydney property market of 15%, the Australian Prudential Regulation Authority (APRA) freaked out and instigated a range of measures to dampen residential property investment for fear of price hikes. This saw higher interest rates, larger deposit amounts and tougher serviceability requirements for investors implemented. This heavy-handedness caused investor lending to fall off a cliff and it never recovered, largely due to most of those measures still being in place for ‘fear’ of causing the housing market to escalate and to ‘protect’ the banking sector.

Well, wake up APRA, you CAUSED price rises and banks are making more money than ever. 

With a genuine lack of understanding of cause and effect, APRA has stripped the market of the necessary rental housing by effectively penalising property investors. This then created more pressure on the housing market raising prices anyway, exactly what they were trying to avoid.

First-time homebuyer (FHB) grants, intended to assist aspiring homeowners, seem to be missing the mark as well. Rather than easing access to the market, these grants have inadvertently fueled competition and inflated prices. This approach fails to address the root problem: a shortage of housing supply. By stimulating demand without adequately increasing supply, policymakers are exacerbating affordability challenges. 

Hey, governments! You can’t give more money to help people buy what does not exist without increasing competition and then prices – yeah, you achieved the very thing you wanted to avoid, just like APRA. 

Indeed, the crux of the issue lies in supply constraints. Investors play a crucial role in addressing this imbalance by contributing to the housing stock. Empowering developers to create more affordable housing options and incentivising residential property investors to purchase them could offer a sustainable solution.

For some time, investors made up the majority of people who bought new and off-the-plan property creating supply and, over time, these properties moved into the owner-occupier market. In recent times, due to a lack of supply and investor lending constraints, more owner-occupiers have been purchasing off the plan. The issue for developers is that the amount of owner-occupier commitment is not enough to warrant the risk of commencing the build … and the cycle of undersupply continues. If only there were a way to encourage more Australians to buy more homes for Australians…

If you look at all the people who rent, 8% of the population (but growing) requires support and accommodation provided by the government – “affordable housing”. Let’s be clear here, this name is a government scam. They have renamed government housing to be called ‘affordable housing’ to fool the community that they are providing solutions for renters, yet 90% of Australians who rent are in private rental accommodation. 100% of solutions that the government is focused on, these ‘affordable housing solutions’ (which aren’t enough to solve the problem in that space anyway), are focused on the 8%!

So basically, 90% of renters have been deserted by every level of government because there is nothing to help the ‘market’ (you know Australians trying to provide for their future by supplying rental accommodation) to provide more rental homes. If the government can’t even provide enough for social housing, how do they think they can help everyone else?

Ultimately, the key to addressing Australia’s housing challenges lies in a balanced strategy that prioritises supply-side interventions to support Australians providing rental homes for Australians, not the government providing housing.

A failure in housing policy at every level of government, for decades, is what led us to a housing crisis. Because it’s been glacial in its arrival it hasn’t been treated as a crisis. To solve a crisis, you need a crisis-level response. You can’t do that by just tweaking the housing policies that caused this crisis – you can’t be the cause and the cure.

The only way to house Australians is to empower more residential property development – the right kind in the right areas with the right density and to empower Australians to provide more homes for other Australians. 

I spoke with Channel 7 about the housing crisis this week explaining that if we don’t fix the crisis, we can all expect ‘tent villages’ to become more and more prevalent and even an accepted form of accommodation by the time the Olympics are hosted in SEQ:

From all this analysis, you can see that residential property investors are desperately needed, but what about the benefits to you? Well, due to the severe undersupply and growing demand for rentals, property prices and rents will continue to rise even with an influx of investors because the gap to fill is so great. You can grow your wealth while helping house communities in a win-win scenario. Talk with our team or your property coach to see what’s possible for you.