In Senate Estimates on Wednesday 28 October, Treasury secretary Jenny Wilkinson, said data from the June quarter indicated that there has been a wind back in lending to investors for the purchase of existing dwellings, which fell by 13 per cent.
“On the other hand, the lending to investors for the construction of new dwellings, or lending to investors for the purchase of newly erected dwellings, both rose by about six-and-a-half per cent in the June quarter, and were nearly 26 per cent higher over the year,” Wilkinson said.
“That’s the earliest indicator, or the June quarter indicator, of what was happening in the investor market, in the owner-occupier market. There has been a fall in new loan commitments. The value of new loan commitments to owner-occupiers. In fact, the fall has been greater for non-first home buyers, than for first home buyers.”
Senator Andrew Bragg, Opposition Housing spokesperson opened the questioning around the impact of the limited recourse borrowing arrangement changes questioning whether it will result in few houses being built.
“Treasury said there would be 4000 fewer homes built as a result of the SMSF ban,” Bragg said.
“I assume you talked to the Treasurer about this particular proposal before it passed parliament?”
Treasury deputy secretary Katrina Di Marco, said in terms of the limited recourse borrowing arrangements, the number [of houses built under LRBAs by SMSFs] in 2023-24 was “around 8,700”.
“When you look at that in terms of the scale of the overall kind of lending in the economy or activity in the economy, that’s less than half a percentage point of new residential borrowing every year,” Di Marco said.
“That’s going to have both established and new [dwellings]. Once you start to break that down these are quite small changes.”
Bragg added that in a housing crisis as is being experienced in Australia, there should be no restraint on housing supply, and that in past years around 200,000 new homes were built in comparison to the 180,000 that may be built this year.
“You say the Treasury says 4000 fewer houses as a result of this ban. The industry says more, like 16,000. Do you stand by your 4000 figure, Minister?” Bragg said.
Wilkinson said the downturn in the housing market is, for the most part, due to cyclical changes and has been impacted by four interest rate rises in the past 12 months.
“The most significant impact, and I I’m sure most private economists are also of this view, is that the most significant impact that we’re seeing in the housing market is the consequence of increases in interest rates because we have housing investments in Australia typically funded through variable rates,” she said.
“Is there an impact of taxes? As I said in my opening statement, yeah, I think that there would be some impact of that. But the modeling that we did for the purposes of the budget was trying to understand what the structural impact of those changes would be, and the net impact of those changes, plus the local infrastructure fund, was that there would be additional housing supply in the budget.”
Bragg said in closing that he was not “clear” if investors have been pushed out of the market, and therefore dwelling investment is actually going down.
“Then there are fewer loans to owner occupiers. Who are these taxes actually going to help?” he said.
