Housing affordability is the most diabolical of issues.
At the outset of the pandemic, a range of commentators lined up to predict horror house-price crash scenarios.
Thankfully, housing markets have been far more resilient than those fears, care of strong fiscal support to the economy, record low interest rates and the confidence boost of HomeBuilder.
Now policy makers find themselves pondering some of the consequences of the opposite outcome, with prices having leapt around the country over the past year.
The federal government has signalled it is considering whether to ask APRA to adjust the macro-prudential settings applying to home loan lenders amid concerns about the indebtedness of some households.
While it’s true that nearly 22 per cent of new loans have a debt-to-income ratio of six or more (which APRA considers risky), it’s also true that mortgage arrears and defaults have been at low levels and have not been impacted by the pandemic.
The Property Council has been at pains to warn of the risks of going too far too soon.
The last time Australia pulled the macro-prudential lever, then-treasurer Scott Morrison saw first-hand the sharp impact this had, including on new housing construction.
The prudential regulator needs to bear in mind that both general fiscal support and the HomeBuilder effect are receding from the economy, while the big economic engine of population growth is yet to begin to restart.
When it comes to housing affordability, regulators have neither a crystal ball nor a silver bullet. Industry will continue to encourage a cautious and sensible approach that won’t risk our recovery from the pandemic.