Weeo, weeoo, weeoo, from the Pascometer yesterday:
The bad news about the regulators’ new attempts to hose down housing investment enthusiasm is that they are, at best, second rate. The Law of Unintended Consequences is always at work, ensuring damage elsewhere in the economy, while the most effective tools for the present circumstances remain locked in Treasury’s cupboard.
The first punch of this new round of whack-an-investor is NAB and Westpac increasing investors’ rates by more than owner-occupiers’. The impact? NAB’s 25 point rise will cost investors a little more to service existing loans, so they’ll be spending a little less elsewhere in the economy. And it shaves investors’ borrowing power for new purchases, so they are more likely to go after cheaper properties – which is where first home buyers tend to concentrate.
Thanks to government failure, the regulators are left with inferior options for their attempt to cool the Sydney and Melbourne housing markets.
Does it do anything to increase housing supply? No. Does it reduce demand? A little bit but it’s marginal and not where you’d like it to. And, like the 2015 macro-prudential squeeze, the impact tends to wear off. Thanks to negative gearing the taxpayer will pick up half the tab for investors in the top tax bracket anyway.
The RBA and Australian Prudential Regulatory Authority aren’t specifically interested in housing prices and the plight of thwarted Sydney and Melbourne first home buyers. Their concern is whether lending for housing has gone crazy to the extent of potentially damaging banks in the event of a downturn – thus the regulators might not limit their efforts to investors if they fail to get adequate traction. They nonetheless have some sympathy for owner-occupiers (who they view as more stable borrowers) and no prize for guessing the federal government would prefer them to concentrate on the investor.
OK, so that seems pretty clear, investors need to be whacked but macroprudential is not enough. We need tax reform. The argument wandered all over the place and was a property price spruik at times but made a decent point.
But then we get this today again from Pascometer:
Jobs, more than investors, drive the Sydney housing boom.
Jobs draw people to want to live in Sydney, jobs enable people to nearly afford to live here by renting the properties investors own, jobs bring people to work in Sydney even though they don’t live her
For some time, the engineers who used to fly north and west from Brisbane have been flying south to Sydney.
On a Sydney CBD construction site, conversation with a carpenter turns to where he lives – in one of Brisbane’s outer suburbs. He’s fly-in-fly-out every second week, leaves Brisbane early Monday morning, is accommodated with other workers in a serviced apartment, goes home that weekend.
…And it all means the pressures on Sydney housing aren’t going away any decade soon.
So, yesterday we are told that regulatory efforts have no chance of stopping the rampant investors that are driving the market. But today it’s not investors anyway?
I could counter many of the points with data but what is the point when there’s just no way to stop Sydney house prices going up forever!
The good news is that, as we know, the Pascometer is a counter-cyclical indicator so his obfuscating bullshit is a signal that the top may be near!
