NAB boss Andrew Irvine warns of pressure from First Home Buyers Guarantee
The boss of one of the nation’s biggest banks says the economics of giving first homebuyers bigger loans needs to be met with more housing action.
National Australia Bank chief Andrew Irvine says while the Albanese government’s expansion of the First Home Buyer Guarantee would allow buyers to increase their financial firepower, it needs to be matched with a supply response.
Irvine said without extra housing, putting more people in the market with access to more funds risks adding further pressure on prices. “Economics would suggest that you’ll have more of an imbalance in supply and demand, and price goes up,” he told The Australian.
“Is it a good policy setting? Sure, but you also need more dwellings because the only thing that’s going to get more Australians in a home is that more homes are being built.”
A key part of the Albanese government’s efforts to tackle the property crisis is a major expansion of the First Home Buyer Guarantee. Last week, the income cap was removed on the existing policy that allows new buyers to get into the market with just a 5 per cent deposit and avoid lenders’ mortgage insurance, which can add to loan costs.
Irvine, whose bank has signed up to support the scheme, said there was a “supply problem in Australian housing, not a demand problem.”
Irvine, a Canadian national, said as well as the well-known constraints around planning and infrastructure, a demographic shift was adding to pressure to the housing stock, which was a phenomenon around the world.
On average, there are fewer people living in each house than previously. At the same time, people are living longer and are healthier in later life, which adds to pressure to housing demand even before taking account of population growth through immigration.
“The other thing that’s important, some of our housing stock is the wrong stock. We’ve got lots of detached homes in Australia, and we need more medium-density housing. That’s one area we need to push on with as well. We need more dwellings and that’s the cold, hard truth,” Irvine said.
Median home prices rose in September, adding 0.5 per cent, with prices increasing as the Reserve Bank began cutting interest rates in February. Property prices are now 6.2 per cent above this time last year, according to the PropTrack Home Price Index.
The official cash rate has fallen to 3.6 per cent from 4.35 per cent at the start of the year.
While the rate cuts are adding to pressure on property prices, the RBA governor, Michele Bullock, last week said there was little she could do as the central bank did not target housing.
“The bottom line is that all I can do is keep inflation low and stable, and keep employment as strong as possible because that gives people the best opportunity to get jobs and be able to possibly get into the housing market,” Bullock said last week.
Economists are now tipping only a 40 per cent chance of another interest rate cut in November, although a move down is more fully priced in for February next year.
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