Nick Xenophon continues to inflate our property bubble

Nick Xenophon continues to inflate our property bubble
Jessie RichardsonDecember 7, 2020

Guest observation

Australian Senator Nick Xenophon continues his push to allow first-time home buyers to tap into their retirement savings to come up with a mere deposit for a home loan, and a life time of exorbitant fortnightly loan repayments.

What Senator Xenophon utterly fails to address is the reckless lending standards of the Australian banking system.

It is hard to find a banking system in this world willing to lend such large sums of debt to home buyers relative to the incomes they earn. Only instances were in countries such as Ireland prior to the global financial crisis.

Xenophon, in a recent interview on The Panel, said "in the order of $30,000 to $40,000 as a maximum," would be allowed for first-time home buyers to take out of their retirement funds to make a deposit for home.

Recent history suggests that every time Australian regulation allows or gives home buyers access to funds originally void, it has propelled property prices.

Clear examples are the various home owner grants and access to self-managed super funds to invest in property.

When property bubbles pop, housing becomes affordable again and first home buyers would need no artificial assistance beyond their means to purchase a property. Its as simple as that – and Senator Xenophon has no clue the level of risk he is trying to make young Australians take on.

The reason property prices are as high as they are in Australia is due to a chronic oversupply of debt. The abnormal willingness of Australian banks to lend large sums of debt to home buyers is clearly visible in the table below.

Hence Australia is experiencing a credit-fuelled property bubble that Xenophon should address in parliament, rather than trying to prop up a bubble that makes Australia look utterly insane.

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Lindsay David is a co-founder of clean technology company GreenRigCo and a former strategy & business development consultant. Lindsay holds an MBA from IMD Business School. He is the author of Australia: Boom to Bust.

 

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