Originally Posted by
GoldfishMan
No I don't, but I used to work in a big bank for many years. That gave me the opportunity to observe how things work right in the thick of it. I also like to keep a close eye on macro factors (policies, markets, etc) that affect our economy. It's a bit of a hobby for me, lol...
During COVID, remember how the RBA dropped rates to 0.1%? At the same time, they also created a huge pool of liquidity (I forgot the name for it, but it was hundreds of billions worth) that was only accessible by the banks through "business related loans".
Now the banks,
they make money using money. They lend it out and charge interest for it. The more liquidity that they can access, the more money they can make. Now here's a big chunk of money that they can access at 0.1% interest, but it's only accessible through "business loans". In reality, business loans were highly unpopular. Nobody was taking out any business loans, I mean come on, we were in the middle of a pandemic. Who's going to expand their business at such a time? But houses and apartments, that's a different story. There's always demand for that.
Almost immediately after that move by the RBA, my bank employer started ramping up work on business loans. Every project that came along was business loan this, business loan that. I was scratching my head thinking, since when was business loans so popular?
So I took a closer look at what was going on. Somewhere in the mix of many projects, there was a small one to "enable home loan origination DURING business loan application". Lol...
Also, about foreign buyers. It's not about racism. There are heaps of people of all races that are cashed up and coming to Oz buying up property. People from the US, UK, India, SE Asia, and of course China. They do this because Oz is a country where the Gov does not really prevent foreigners from buying property, unlike most other OECD countries. Sure, a foreign buyer needs FIRB approval to buy Oz property, but they rarely reject any applications.
Once these cashed up people are allowed into the mix, you don't need a lot of them, they will distort the market in such a way that it weakens the correlation between local wages and home prices.
People who want to let foreign buyers in always use the small percentage to argue that they can't be a big factor, but there are 2 problems with that. 1, don't need many of them to have the above distortion effect on the market. 2, the best ways to get around the FIRB controls is to not appear as a foreign buyer, so they don't show up in the stats.