Australia’s falling housing market:
Combined with record debt loads:
And falling houshold income:
Has left the Australian housing market teetering “on the precipice” according to DFA’s Martin North, who was interviewed as part of a New York Times investigation:
Georgia Blackie felt she needed to buy it or rent for the rest of her life.
She lives in Melbourne, one of the world’s wildest and most expensive real estate markets…
Lately it has cooled off, though, and people like Ms. Blackie may pay the price.
She and her partner closed on the townhouse last August for 720,000 Australian dollars, or about $533,000. But since the market’s peak in November, neighborhood home values have slipped about 6 percent…
“If property prices do go backward,” said Ms. Blackie, a 31-year-old lawyer, “where does that leave you?”..
If many households are forced to sell, “to me that’s the biggest match that could ignite things,” said Richard Holden, a professor of economics at the University of New South Wales…
“We are on the edge of a precipice,” said Martin North, principal analyst for Digital Finance Analytics, an independent research and advisory firm. “All of the forces that have driven the home sector and the debt sector higher in the last 20 years are all coming to a critical inflection point”…
[North] estimates that of 3.5 million mortgages where the owner lives in the home, almost a third of the households have incomes close to or less than their expenditures. He predicts that at least 50,000 homeowners may default in the next 12 months…
“Almost everywhere you look, you can see icebergs,” Mr. North said…
About one-quarter of Australian households have less than one month’s extra put aside in savings to make the next mortgage payment, the country’s central bank said in February…
The immediate outlook stinks, especially in Sydney and Melbourne.
Investors are deserting the market:
Sales are plumetting:
Auction clearances are plumetting:
And foreign buyers are deserting:
The market is also facing further stiff headwinds in the form of:
- The massive roll-over of interest-only mortgages into principle and interest (raising repayments by 35% to 50%);
- Tightening lending standards arising from the banking Royal Commission;
- Rising bank funding costs; and
- Labor’s negative gearing and capital gains tax reforms should it win the next election.
These factors combined will continue to weigh on housing values and make investing in property a particularly risky proposition, especially in Sydney and Melbourne, where values are most over-valued, investors are more dominant, and auction clearance rates, prices, and investor finance growth are already falling.
Today on MB Fund Webinar, Australian Housing – Boom and Doom will have Economist Leith van Onselen and Strategist David Llewellyn-Smith join, Damien Klassen and Tim Fuller as they deconstruct the Australian Housing Market:
- Current snapshot of Australian housing.
- Deep dive into Sydney and Melbourne.
- Outlook confronting the market.
Feel free to send questions to [email protected] or #nucleusinsights for the chance to hear a detailed breakdown of your question live on air. SIGN UP
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