{"id":134557,"date":"2023-09-04T19:19:15","date_gmt":"2023-09-04T19:19:15","guid":{"rendered":"https:\/\/finbestnews.com\/?p=134557"},"modified":"2023-09-04T19:19:15","modified_gmt":"2023-09-04T19:19:15","slug":"the-housing-joke-is-wearing-thin-for-the-tiktok-generation","status":"publish","type":"post","link":"https:\/\/finbestnews.com\/economy\/the-housing-joke-is-wearing-thin-for-the-tiktok-generation\/","title":{"rendered":"The housing joke is wearing thin for the TikTok generation"},"content":{"rendered":"

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You might have heard ANZ\u2019s chief executive worry last week about banking and access to credit becoming a privilege available only to the well-off. It\u2019s something most young people have known for some time; the surprise was that a big boss took notice and decided to talk about it.<\/p>\n

I\u2019ve heard over and over again from some in generations before us that saving for a house isn\u2019t easy, that they had to rent a shoebox apartment for years, too, that they started off in the outer suburbs and that we just need to be patient and work hard.<\/p>\n

<\/p>\n

A smaller proportion of people are securing home loans.<\/span>Credit: <\/span>Louie Douvis<\/cite><\/p>\n

But as the population has grown, those outer suburbs have become further and further away, house prices (and living costs more broadly) have continued to rise and the plumbing-problem-prone flat I rent with my friend is looking increasingly like a permanent hermitage.<\/p>\n

Dark humour has become a coping mechanism of sorts. Remember the \u201cfeed your family for $10\u201d Coles commercial with Curtis Stone? Friends at work recently pointed me to a video making rounds on TikTok showing $10 only bought a bag of cheese. That evening, I walked into Coles and saw that wasn\u2019t a joke. I had to laugh.<\/p>\n

But, really, that\u2019s a problem. When wages are rising slower than prices, it\u2019s no surprise that banks aren\u2019t eager to lend to those with lower incomes and savings. The fact that many young people are also saddled with tens of thousands of dollars of tertiary education debt doesn\u2019t help.<\/p>\n

ANZ boss Shayne Elliott blames regulation for the banks\u2019 diminishing ability to lend to \u201crisky\u201d borrowers. Tighter lending standards and capital requirements over the years from the Australian Prudential Regulation Authority (APRA), have meant banks are unable <\/i>to extend credit to those who are less wealthy, he argues, or have to pass on the higher compliance costs to customers.<\/p>\n

While those regulations are in place to maintain a safe banking system that doesn\u2019t overextend itself, there is a need to strike the balance between keeping the system strong and making sure responsible customers have the chance to access credit. Australian Banking Association chief executive Anna Bligh says, \u201cwith an additional 1175 pages of new laws and regulations on banks in the past four years, it\u2019s probably time for governments and regulators to take a breather for a while.\u201d<\/p>\n

Tighter lending standards may not be the full story, but it\u2019s true that a smaller proportion of the population is accessing loans.<\/p>\n

The value of new loans for owner-occupiers to buy existing houses grew from about $6 billion in July 2005 to about $12 billion in July 2023 (after spiking in the past few years because of government stimulus measures). But that doubling doesn\u2019t mean more people are getting loans. The average size of these loans grew from about $248,000 in July 2005 to $593,000 in July 2023. About the same number of people are being issued loans as 18 years ago, while the population has grown by about 6 million people in that time, meaning a smaller proportion of people are securing loans.<\/p>\n

Increasingly, people who can\u2019t secure loans with traditional banks are turning to non-bank lenders, especially for mortgages. That\u2019s not always a bad thing, but these institutions often provide less favourable terms to borrowers because they\u2019re pricing in the higher risk they\u2019re taking by lending to those that the banks may deem too risky.<\/p>\n

Hidden behind the major banks\u2019 surprisingly healthy delinquency rates recently, is the more notable rise in indicators of financial stress among non-bank lenders. With limited options, lower-income customers are being pushed to the fringes where they\u2019re more likely to get into trouble.<\/p>\n

APRA is not responsible for regulating non-bank lenders, which is part of what makes non-bank lenders more risky, but its chair John Lonsdale said non-bank lending was an area the regulator kept an eye on to assess broader risks to the system.<\/p>\n

\u201cDelinquencies, 30-day arrears, they are kicking up a little bit among major banks but are still very low,\u201d he told media last week. \u201cBut that is not the case on the non-bank side where I think you are seeing more stress.\u201d<\/p>\n

Non-bank lenders inject more competition into the system, which helps to keep banks on their toes. But if banks are unable to compete in the same space because of excess regulation, that benefit may no longer exist and lead to worse terms for borrowers pushed to the fringes.<\/p>\n

The big issue for young people, though, is less with the banking system itself, and more to do with the broader issue of lack of housing supply. If it feels like you\u2019ve heard this a hundred times before, it\u2019s because you have. We\u2019ve been harping on about it for years. But little has been done about the shortage of housing that has continued to drive prices up.<\/p>\n

The bank of mum and dad is an option for some, but it\u2019s important that we all get a fair go, regardless of the wealth we were born into.<\/p>\n

Zoning laws need to be wound back to allow more density and there should be more incentives, whether through reducing red tape or increasing spending on affordable housing, to build more houses. We have to go hard now because we know how long building takes, and the longer we wait, the harder the problem gets to fix.<\/p>\n

While we laugh off our problems now, I suspect the jokes won\u2019t be quite so funny down the line. Let\u2019s not wait to find out.<\/p>\n

Millie Muroi is a business reporter at The Sydney Morning Herald<\/em>.<\/strong><\/p>\n

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. <\/i><\/b>Sign up to get it every weekday morning<\/i><\/b>.<\/i><\/b><\/p>\n

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