Labor won a few days of decisive victory to determine the task of housing affordability, with those responsible for mortgages pouring cold water on it.
Andrew Irvine, chief executive of National Australia Bank, said the country “may not be able to get the results we want” as the bay between homeowners and everyone else threatens to expand in the coming months.
Long-time ANZ CEO Shayne Elliott was more straightforward when he spoke to the media on Thursday.
"I don't know we're dealing with it. I mean, things are getting worse," Elliott said, who resigned from his role Friday after nearly a decade leading the bank.
“I know both sides of politics have good intentions, very thoughtful policies…but the reality is, when we sit here today, I’m not sure if we’re confident that we’ll see any material changes soon.”
Bank owners point out that their Dour view lacks housing supply.
There are other factors, such as the need to improve transportation networks and infrastructure to ignite supply, address unnecessary planning barriers, and address high construction costs and labor restrictions.
The affordability issue has been established for decades and the CEO of Bank of Australia does not think it will be resolved soon.
“The dream of Australia is to own a house, you want young people to have the opportunity to do it, you want new Australians to have the opportunity to do it,” Irving said.
"The only way to solve this problem is to fix the supply. There is still too much discussion about housing on demand."
Lack of reformist housing policies - Economists criticize both sides of politics due to criticism from their competitive election platforms, which sparked expectations that house prices will continue to rise, making home ownership even more out of reach within the younger generation.
Many advocates of housing reform have abandoned expectations that the federal government will help solve the problem after 2019’s poor labor campaign to thoroughly improve responsibility and capital gains taxes, both representing strong reforms.
Advocates are now focusing on lease rights, which is a national issue. The idea is that increasing the leasehold rights may reduce the value of the leased property at the expense of the landlord, thus reducing affordability.
Those who are already on the property ladder don’t want to get off the bus.
Even banks are surprised how many people have scrambled to get mortgages in recent years and then faced a series of rising interest rates and a sharp rise in cost of living – and can also pay back the repayments.
“The resilience of clients who have faced major cost-of-living challenges over the past few years has been impressive,” Westpac CEO Anthony Miller said on Monday.
Part of the reason people cling to mortgages is that there are no good options given the tight rental market.
Over the past six months, mortgage arrears in major banks tend to be flat or even decline, hovering below pre-pandemic levels. The number of households requesting a misery package from lenders is usually falling.
For those who can mortgage, relief can be seen.
The Reserve Bank lowered its cash rate by a quarter on May 20 after lowering its borrowing rates in February, which is certain that it lowered its critical interest rate from 4.1% to 3.85%.
From there, by December, pricing in the financial markets fell further to 3.1%. Experts have less bullishness, and the general consensus is that the cash rate will reach 3.35% from the end of 2025.
Either way, mortgage holders intend to significantly reduce their interest payments.
Monthly repayments on the $500,000 loan are at $3,225 at 6.01%.
Each cut of 0.25 percentage points will reduce interest bills by $76 per month. Another tax cut this year will bring $304 to the monthly household budget.
While existing homeowners will cheer for the downward pace, it is even more complicated for those looking to break into the real estate market or upgrade their family homes.
Lower interest rates improve borrowing capacity - meaning buyers can afford more. But cheap money will also raise prices and potentially widen the deposit gap and exacerbate the affordability crisis.
AMP chief economist Shane Oliver said he expects to lower the tax rate on May 20 and then drop in August. He then expects to cut it again in November and early next year.
Oliver said the combination of cheap loans and Labor’s electoral housing policy will help first-time home buyers buy with a smaller deposit to eventually raise property prices.
"Lower interest rates and 5% deposits may feel like a good thing, and it will be easier if you enter early because they can borrow more and serve your loan," he said.
“This is not the case for those who come in later (after prices start climbing faster) – the ultimate winner is the existing homeowner.”
Louis Christopher, founder of SQM Research, said that as the years pass, lowering interest rates will have a greater impact on house prices.
Still, Christopher is looking forward to a busy property auction winter, but with the elections and April holidays.
"We expect housing prices nationwide to rise 6-10% in 2025," he said.