Relaxing lending rules and improving access to finance are needed to encourage more first-time homebuyers and jumpstart the economy amid the COVID-19 outbreak, experts from the Housing Industry Association (HIA) have said.
A recent HIA study shows that with low population growth, strict access to finance to build a new home is the main drag on housing and economic recovery.
Tim Reardon, chief economist at HIA, said that in the years following the Global Financial Crisis (GFC) Australia's financial landscape has tightened, making the Access to finance more difficult for first-time homebuyers today than it was in 2009.
"If we revert to past lending practices, the Australian economy would recover from the COVID-19 recession faster," he said.
The federal government recently announced that it would simplify the rules on bank loans to stimulate the economy. Federal Treasurer Josh Frydenberg said while credit has become cheaper due to low interest rates, many potential borrowers are still barred from accessing finance due to strict regulations.
"The flow of credit will be absolutely critical to our economic recovery. But our current regulatory framework, when it comes to lending, is not fit for purpose. It has become too prescriptive and responsible loans have become "restrictive loans". Frydenberg said in a media statement.
Even the Reserve Bank of Australia reported that the tight regulatory regime was a factor that held back credit growth, said Denita Wawn, CEO of Master Builders Australia.
"It's good to see the federal government giving banks the flexibility to process applications on a case-by-case basis, which should lead lenders to provide mortgage financing to more people," she said. declared.
A separate survey from HIA showed that for many builders in Australia, access to finance and lending practices are the biggest issues in today's market environment, not the impacts of ; COVID-19 epidemic.
Graham Wolfe, Managing Director of HIA, said the government's plan to improve access to finance is necessary and laudable, and would inject millions of dollars into the economy at a time when Australia needs it most.
"It is a shame that it took a recession for these rules to change. This plan does not solve all problems with access to finance and credit; however, HIA believes it does. # 39; is a step in the right direction, ”he said.
Additionally, Wolfe said this announcement will complement existing support programs to boost buyer activity, including the HomeBuilder and the First Home Loan Deposit Schemes.
“Banks will always need to maintain proper application procedures and there is a mutual responsibility on the customer to provide accurate and truthful information when applying for a loan,” he said.
Adrian Kelly, President of the Real Estate Institute of Australia (REIA), said the announcement was also a big win for home sellers as demand for homes improved.
“This will allow sellers to list their properties with the knowledge that the buyers will be there. By improving demand, the government reduces the chances of lower prices, which means that doomsday forecasts can be archived, ”he said.
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