EDITORIAL: Chalmers’ credibility on the line over housing gloom
No doubt Jim Chalmers has his fingers crossed behind his back for good luck. His credibility is on the line.
The Albanese Government has been locked into the mantra that falling house prices is good news.
That first-homebuyers can get a shot at getting into the market.
But even it must by now be watching the slump in house prices with a degree of nervousness.
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By continuing you agree to our Terms and Privacy Policy.A crashing housing market will not go down well. And the signals coming out of the front end of the loan market indicate more falls are ahead — the line up of big banks reporting falling mortgage applications continues to grow.
On Wednesday Australia’s largest bank warned the economy and mortgage applications were slumping.
In its latest update, Commonwealth Bank reported a 15 per cent slump in loan applications since May.
Loan applications had also dropped 17 per cent from the same time last year.
On Monday Westpac revealed an 18 per cent plunge in owner-occupier mortgage applications and a corresponding 26 per cent slump in investor loan applications since the May Federal Budget.
Loan applications were 11 per cent below the five-year average.
Last month NAB reported a 15 per cent fall in mortgage applications over the preceding three months.
Borrowers will not need any reminding that the Budget headline act was the broken promises around capital gains tax and negative gearing changes.
But the simple fact is that uncertainty created by the Budget tax changes and three interest rate rises this year — and warnings more may still be to come — means many buyers are putting their hopes on hold.
That is understandable. First-homebuyers usually operate on the edge.
They work out what they can afford and then perhaps push even harder.
They don’t want to go out on a limb and then see the value of their home fall, pushing them into negative equity.
If they are not sure where prices and interest rates are heading, they are more likely to park their aspirations.
It feels like the cloud of uncertainty is getting darker and the bottom of the market is still to come.
Treasury’s modelling in the Budget said the housing tax changes were expected to lead to “a small and temporary slowing in house price growth, estimated to see prices grow by around 2 per cent less over a couple years relative to no tax policy change”.
“Lower house price growth will have a small impact on housing supply, more than offset by the additional homes supported by housing supply measures in the Budget.”
That is now looking very shaky.
On Wednesday Treasurer Jim Chalmers stuck by the forecasts, insisting housing was a long-term investment.
“The Treasury assumptions in the Budget around house prices are assumptions for the next couple of years, not the first few months after the Budget,” he said.
And he sought to spread any blame. “What we’re seeing in the housing market is a consequence of a whole range of factors: economic conditions, interest rates, policy changes. Not any one factor on their own,” Dr Chalmers said.
No doubt he had his fingers crossed behind his back for good luck. His credibility is on the line.
