An elite business writer and financial planner has rejected comments made by former prime minister Paul Keating that SMSF borrowing is the prime suspect behind the Reserve Bank’s investor lending concerns.
Finance Made Easy director Tony Bice, who ranked in the top ten Elite Business Writers of 2014 in sister-publication The Adviser, says the contribution by SMSF investor lending to the total volume of investor business being written is “minimal”.
“Sure, there is a mechanism available for people to buy investment properties inside their super but if you look at the volumes that are for SMSF properties as a percentage of the overall business in the investment space it’s minimal,” Mr Bice told Mortgage Business.
“I don’t think that has any bearing whatsoever with the issue at hand of the huge volumes of investor business that is written,” he said.
Mr Bice’s comments come after former prime minister Paul Keating called on the current government to rein in SMSF lending.
Speaking at a MaxCap banking forum in Melbourne last week, Mr Keating blamed SMSFs for the “dramatic acceleration” in investor lending, which now accounts for half of all mortgages written.
Dismissing these remarks, Mr Bice said the real driver behind the issue is foreign investment.
The industry has been questioning the root of the issue since the Reserve Bank highlighted in its stability review that acceleration in investor lending had created an “unbalanced” mortgage market.
“The Reserve Bank is out there trying to get a handle on what is causing the surge in investor lending; I think if they want to get fair dinkum the first thing they need to do is get some sort of meaningful measurement in place that’s realistic,” Mr Bice said.
“At the moment the government has no idea what percentage of investment represents foreign investment in Australia,” he said.
“Until they get that part right, they are not going to be able to get to the cause of the issue.”
Foreign investment in Australian residential property is on the rise, with the latest NAB Residential Property Survey finding that foreign buyers accounted for 16.8 per cent of total demand for new developments in the third quarter this year.
NAB expects demand to increase further next year to 17.3 per cent.
Meanwhile, local lenders have been cashing in on overseas demand.
Yellow Brick Road executive chairman Mark Bouris told the Australian Financial Review that a third of all mortgages written by the lender last month were to Chinese investors.
“The foreign investment loans have been a feature in the past seven to eight years,” Mr Bouris said.
“It’s a big ratio at the moment and we get them verified in China with facilities we have,” he said. “They are supporting new developments.”
Meanwhile, Australia’s largest mortgage aggregator, AFG, said approximately 20 per cent – or one in five –home loans processed last month were to foreign investors.