The latest results from our household surveys reveals that by the end of January 2021, overall levels of mortgage stress dropped below 40%, to 39.5% – still well above the level prior to the virus hitting.
This is a consequence of lower mortgage rates following the RBA cash rate cuts, liquidity support and quantitative easing, plus less impact from the virus on lock-downs and employment. That said, whilst many households have grown their savings buffers, a considerable number remain close to the edge, in cash-flow terms. More than 1.4 million mortgaged households remain under pressure
Across the states, mortgage stress fell significantly in VIC, but remains highest in TAS. Rental stress is still elevated, with NSW and ACT having the most significant issues, while property investor stress in also highest in ACT and NSW, thanks to falling returns from rents, and rising vacancy rates in some areas. As a result many property investors are considering selling into the autumn market rise.
Levels of stress vary across our household segments, with many living on the urban fringe in the high-growth corridors still under pressure. A considerable number of more affluent households, often holding multiple investment properties are also under pressure. Young Growing Families, which include many First Time Buyers remain stretched, with overall Financial Stress (an aggregate of mortgage, rental and investor stress) are the most stressed.
Looking at specific post codes – mortgage stress is highest (by count of households) in Narre Warren 3805, Cambelltown (2560) and Tapping/Wanneroo (6065). All high growth corridors.
Rental stress is highest in central Melbourne (3000), Cambelltown (2560) and Liverpool (2170). Much of the pressure is from high-rise occupants, as well as in the high growth corridors.
Property investor stress is highest in Surfers Paradise (4217) where tourism is well down, Central Melbourne (3000) and Northern Beaches (2099).
Finally, overall financial stress, our aggregate measure is highest in Cambelltown (2560), Liverpool (2170), Toowoomba (4350) and Central Melbourne (3000).
We discussed this data in detail on our live show last night.
We also updated our scenarios, reflecting the more positive economic news – though retain alternatives where the virus remains less contained. The path of the virus, and its control is clearly directly linked with economic performance and the trajectory of mortgage stress, and home prices ahead.
We discuss the latest Independent Reserve household survey on crypto, which highlights the momentum in Australia with the CEO, Adrian Przelozny.
CONTENTS
0:00 Start 1:42 Awareness 2:31 Adoption 4:20 State Variations 5:30 Age Distribution and Profit 7:30 Amount Invested 10:00 Trust And Confidence 11:15 Future Price Expectations 13:15 COVID Impact 14:20 Gender Divide 16:16 Superannuation and Crypto 18:45 Bitcoin V Ethereum 22:00 CDBC and Crypto 25:38 Close
Join us tonight for a live Q&A as we walk though the latest data from our models, and explore financial confidence and property investor yield using our mapping tools.
We will also have our post code stress tool online to answer specific location queries…
Journalist Tarric Brooker and I have our Friday afternoon chat.
Contents 0:00 Start 0:32 Introduction 1:10 The China Factor 7:00 Iron Ore 10:00 Border Opening 12:35 Stimulus 15:30 Labor Positioning
22:30 Home Prices and the Election and K 29:14 Demand Drivers 32:10 First Time Buyers 35:00 Retiring With A Mortgage 39:30 Just Keep Paying The Mortgage 42:00 Economic Realities And Responsible Lending 42:45 Value Narrowed To Financial 46:00 Fear Factor 49:36 The Old New Normal 53:30 Ending
Go to the Walk The World Universe at https://walktheworld.com.au/
We discuss the latest data from our household surveys.
CONTENTS 0:00 Start 0:31 Introduction 1:00 Overall Index 2:10 Property Segments 3:30 By States 4:20 By Age Bands 6:15 Wealth Segments 7:11 Job Security 7:56 Income 8:30 Costs Of Living 9:45 Savings 10:57 Debt 12:40 Net Worth 14:24 Other Indices 18:25 Conclusions 20:09 Outro
Go to the Walk The World Universe at https://walktheworld.com.au/
Steve is Canstar’s Group Executive, Financial Services & Chief Commentator. He and I discuss the traps created by low rates, and what households need to consider in reaction to them.
This was not meant to happen – after all the official story is we are in recovery mode – yet the latest results from our rolling household surveys tells another story as unemployment and underemployment rise further, even as Government financial support is tapered down. As a result mortgage stress – those households with a mortgage and cash flow pressures – rose to an astonishing 41.6% in November. Before the pandemic we sat at 32.9% in February, so nearly 10% more households are now feeling the pain.
The surveys showed some mixed drivers of this result. Sure, a number of larger firms have come off JobKeeper as the economy reopenes but more smaller firms are putting people on JobKeeper, even as the level of support is reduced. This was confirmed by the segmental analysis of the latest payroll data which showed growth among larger firms but a fall among smaller firms.
More households have had to recommence mortgage repayments now, with the ABA reporting that among the top 7 largest banks, deferred loans dropped from a peak of $250 billion down to $86 billion in November, with home loan deferrals by the seven largest banks are down to fewer than 145,000. But this has placed considerable pressures on households recommencing, even as unemployment continues to rise – to 7% in November according to the ABS and remember this is artificially understating the true picture as JobKeeper recipients are excluded.
The unemployment rate increased 0.1 pts to 7.0% (1.7 pts higher than a year ago)
Unemployment increased by 25,500 to 960,900 people (and increased by 238,900 over the year to October 2020)
The youth unemployment rate increased 1.0 pts to 15.6% (and increased by 3.1 pts over the year to October 2020)
Our analysis also examines Rental Stress, Property Investor Stress and overall Financial Stress by state and household segment.
Across the states, Tasmania still retains top mortgage stress spot in in percentage terms, followed by Victoria and Western Australia. Rental stress is highest in New South Wales and Victoria, and across Australia. On average 35.2% of those renting have cash flow issues. Among property investors, 25.6% reported a cash flow deficit, as rents fall, and vacancies rise. More are still considering selling – especially those holding high-rise apartments in Sydney and Melbourne.
Across our segments, mortgage stress is highest among young growing families, which includes many first time buyers who were attracted into the market by Government incentives. This will not end well. Those living in the high growth corridors are also under pressure, especially on the urban fringe. And we see more affluent households caught up in stress, thanks to higher levels of unemployment – and high leverage.
Rental stress is broad based, with many first generation migrants under pressure, as well as young affluent.
Many affluent households with investment property are stressed, thanks to the proliferation of multiple properties, and high leverage, even as rentals fall in some areas. Once again, units are most exposed.
Overall financial stress (an aggregate of the three elements we discussed) is broad based across our segments. This is a significant structural issues – and one which was already in play BEFORE the pandemic. But it is significantly worse now.
The top postcodes by mortgage, rental and investor stress are presented below. This data is sorted by the number of households impacted by stress (again in cash flow terms). We see high representation in high growth corridors across the country, as well as some inner City suburbs.
Investor postcodes show the location where the investor resides, not necessarily the location of their investment properties.
Overall financial stress is highest in the high growth corridors, areas where many households are under pressure, yet also areas where more development in under way and home land packages are being pushed very hard though the current Government schemes.
We also mapped the stress – here is an example of mortgage stress in Melbourne. This is to illustrate the patchwork nature of stress (orange and red are high stress areas).
Two final points, as Government support is wound back further, especially in the March quarter next year it seems likely stress will continue to bite, unless unemployment turns around faster than expected.
And as the ABA said recently
“Don’t wait till you are in over your head, talk to your bank, they’ll help you find a way through this. Don’t tough it out on your own”,
This is excellent advice, and should sound a note of caution to those who are considering a property move in the current environment. Mortgage stress can put considerable pressures on households, and often leads to a sale later. So new purchasers should be cautious, and develop their own cash-flows prior to committing – just because a lender agrees to make a loan, this does not necessarily mean its a sensible decision from a borrowers point of view – a bank has a completely different view of “risk”. So buyers beware!
