Category: Household Survey

FINAL REMINDER: DFA Live Tonight 8pm Sydney – Latest Household Confidence Update and Live Q&A

Join me tonight at 8pm Sydney for this weeks DFA live stream. We will be updating our latest survey results, looking at the RBA minutes out today, and we will also have our post code database online.

You can ask a question live via the YouTube chat and join the discussion.

More Households Slip Into Financial Stress

The August 2020 data from our surveys continues to tell a sorry tale of more households feeling the pinch, whether they are mortgaged, renting or investing. Within the numbers there was a slid in Victoria in particular reflecting the latest lock down and the rising pressure on business there.

We discussed this at length in our live show yesterday. Here is a link to the HD edition:

Overall mortgage stress came in at 40.1%:

This equates to 1.52 million households, with TAS, VIC and WA leading the pack.

Young Growing Families, and Urban Fringe households are most strongly represented. This includes significant swathes of First Time Buyers.

The post codes with the largest counts of stressed households coincide with areas of high recent development, where households have large mortgages, and VIC is over represented thanks to the lock downs.

Rental stress remains a significant issue also, with 41.1% of Renters in difficulty, or 1.78 million households.

Within the segments, again Young Growing Families are most impacted.

The post codes with the largest counts are revealed here.

Finally, investors remain in crunch territory, with 25.4%, or 826,000 under water, or trying to sell as rentals slide, and property values ease.

More affluent households are most impacted.

Once again Melbourne 3000 contains the latest number of stressed property investors (their investment portfolios can be anywhere, this is where they reside).

We will publish some stress mapping later, but clearly the fiscal cliff, which is now leglislated, will push more over the edge. Expect higher default levels over the next few month, more forced sales and less household consumption.

Stressing About Financial Stress

We discuss the concept of financial stress and illustrate this with an extract from our household surveys, ahead of the latest results which we will discuss on Tuesday. https://youtu.be/8gO_29PUDw8

National Debt Helpline: https://ndh.org.au/
https://mozo.com.au/family-finances/where-to-find-free-financial-counselling-services-in-australia

Mortgage Stress Eases A Little In May

The latest DFA household survey results for May 2020, from our rolling 52,000 survey reveals a slight fall in households in mortgage stress, from over 38% last month to 37.5%. This still means 1.4 million households are experiencing cash flow issues, despise the Government support programmes and Bank repayment holidays. The full pack is available for download.

Before COVID, the rate was up to 32.9%, thanks to rising costs and flat incomes, and the rate would have been significantly higher without JobSeeker, JobKeeper and Bank repayment holidays. Ahead, of the September “cliff” when the supports are removed we are projecting a further rise to 40.3%, though if the supports are tapered, this might be lower in reality.

To assess mortgage stress we do not use a set percentage of income going on mortgage repayments, rather we look at total cash flow – money in and money out. If households are under water they are deemed to be in stress. More than 10% under water, then severe stress. Of course they may have assets like deposits, or put more on credit cards, but generally households under pressure spend less, hunker down, and some, 2-3 years later end up selling or even defaulting. Stress indicators are an early warning sign of potential issues ahead.

Across the states, Tasmania has highest proportion of households in stress (a function of lower incomes,recently rising home prices and mortgages and a stalled tourist sector in the state). The largest counts are found in NSW and VIC, whereas the highest default projection rates are found in WA.

Across our segments, young growing families, including first time buyers, are the most stressed. However we also see a rise in “affluent stress”

Stress exists across the regions, this is not just a major City story. In fact some of the most stressed areas include regional Victoria and New South Wales. The percentages of households in stress do vary.

Nationally the most stressed post codes include Ballarat 3350, Hillside and Sydneham 3037, 6030 which includes Clarkson and Tamala Park, and 3030 Werribee and Point Cook. Many of these areas include large swathes of relatively newly built property on small urban estates. Cranbourne 3977 carries the largest number of households risking default.

You can look at the detail behind our analysis. Click on the image to load or save the PDF file. You will need to have Acrobat installed.

You can also watch our live show where we discuss mortgage stress and report on a range of individual households.

Finally, I discussed our research with Nucleus Wealth in their Podcast Series:

Mortgage Stress Up Again In April

The latest DFA mortgage stress data, derived from our rolling household surveys reveals than an additional 100,000 households joined the cash-flow stressed in April, bringing the percentage of households to more than 38%, which equates to more than 1.4 million.

The trajectory is still set to reach more than 41% by August. Our estimates take account of the enhanced JobSeeker, JobKeeper and Bank mortgage repayment holidays. Given the ABS reported around 650-700,000 employed people have lost work since mid-March, we expected these increases to track close to our estimates.

A reminder, we define mortgage stress in cash flow terms, rather than a set proportion of income. One other factor in play is that many households relied on multiple incomes and the loss of just one is sufficient often to push people into stress. Defaults are likely to follow, but not immediately, as people draw on savings, put more on credit, or simple hunker down for a time.

Across our segments, young growing families, at more than 70%, are at risk, follower by those battling on the urban fringe. But we continue to see a growth in more affluent households also being hit.

Across the states, Tasmania contains the highest levels of mortgage stress, thanks to the over-reliance on tourism and recent price rises relative to income. Some lenders have become more cautious here, with many investors unable to secure a mortgage repayment holiday.

Across the regions we see pockets rising in regional areas, as well as the main urban centres. Mortgage stress is not just a big-city disease.

By postcode, Melbourne post code 3806, Berwick and Harkaway now leads the way with more than 7,000 households in the district under pressure. VIC figures strongly with the top 5, with 3350 Ballarat, 3030 Werribee and 3037 Sydenham all impacted. Second though behind 3806 is WA code 6030 which includes Clarkson and Tamala Park. Most of these areas are high growth development corridors, where prices and incomes are above average. Within these areas there are also a sizable number of property investors.

Finally, there are 1.7 million households in rental stress – defined again in cash flow terms. This equates to nearly 40% of all renting households. The regional variations are again quite stark with stress peaking in Canberra and the South Coast (where bush fire damage remains).

Melbourne post code 3000 recorded the highest count of rental stress, thanks to large numbers of high-rise units being built there, the loss of student and AirB&B clients and simple oversupply. But post codes in Queensland and NSW are also badly hit.

Given the trajectory of the economic downturn, we expect stress to continue to build. The most significant question is the impact of the “cliff” in September where mortgage repayments and rental default freezes, at the same time when Government support schemes all are expected to terminate. Given that the June unemployment figure will likely to 10% (the true figure much higher) and according to the RBA unemployment will remain elevated through 2021, there is little prospect of the trends reversing anytime soon, even at current low interest rates.

Individual households will need to consider cutting their losses in these circumstances and as a result we expect the supply of rental property will rise, and a hike in property to list will follow later.

This has the hallmark of a long slow” U” not a “V” shaped recovery.

The Elephant In The Room – Podcast With DFA

The Elephant In The Room Property Podcast is run by Veronica Morgan & Chris Bates. I had a chat with them the other week. Now released as Episode 123 | To buy, or not to buy: that is the question.

Their introduction:

Sensationalist media, conflicting reports and anecdotal evidence, but what does the data say?


After Chris’s numerous appearances on Martin North’s ‘Walk The World’ Youtube channel we finally have brought Martin to our own turf. Martin is the founder of Digital Finance Analytics, a boutique research, analysis and consulting firm, he is one of the most regarded authorities in the research space with several media contributions such as ABC new, AFR and 60 minutes. In this data driven episode, we get down to the question at hand: do you buy or do you sell, what is the data showing, and is it reliable? Find out if people are borrowing too much, what properties are beating the downturn and how are individuals discovering the opportunity.

Here’s what we covered:

  • How are the 1000 households surveyed every week reflective of Australia?
  • How did Martin enter into the finance commentary arena?
  • What patterns are showing which suburbs are going up and which are going down.
  • How are the 250,000 first home buyers (per year)  finding ways to enter the market?
  • Why newly built properties are at the greatest risk.
  • How is the data segmented to better reflect real profiles?
  • Will there be low or high capital growth over the coming years?
  • Are we reaching our ‘peak debt’?
  • How many properties are vacant in Australia?
  • Why is there simultaneous oversupply and undersupply in the market?
  • What happens now since migration is zero?

https://www.theelephantintheroom.com.au/podcasts/123

Household Financial Confidence Off The Mat – Just!

Our latest household financial confidence index improved a little in April, up from 73.2 in March to 75.8 in April. That said, it is still well below the 100 which is a neutral setting, meaning that households are extremely cautious about their finances. 

Across our wealth segments, those free affluent households recovered the most mainly thanks to the recovery in stock markets over the past month. Those renting are benefiting from falling rents (though many have income shocks to deal with) while those with a mortgage showed little evidence of a recovery in confidence, thanks to rising debt concerns.

Across the age bands, those aged 50-60 showed the strongest bounce, while those aged 20-30 reported a further fall – not least because younger households tend to be more exposed to zero hour contracts, and part time employment not supported by JobKeeper.

The recovery in confidence was evident across all the states, with NSW and VIC on average more positive relatively speaking than SA and WA.

Across our property segmentation, owner occupied households improved, as did those not holding property, but property investors fell again, thanks to less support from banks in terms of mortgage repayment holidays and falling rents and occupancy. Around 8% of property investors are seriously looking to sell their property if they can. More on that in a future post.

The true state of play is best shown when we look at the moving parts of the index. 67% of households now feel less secure regarding their job prospects than a year ago, a rise of 28% from last month.

There was a 14% rise in those feeling less comfortable with their savings, to 56% of households. There was a clear intent to try to save more in the months ahead, given current economic uncertainties.

65% of households are less comfortable with their ability to service debt, a rise of more than 20% of households, this despite falling interest rates and bank support schemes. Around $160 billion of loans received some leniency from the banks, but that is a small share of the $1.7 trillion mortgage sector and the $280 billion SME sector.

Income pressures are mounting, with 14% saying their incomes had fallen – to 66% of households, while under 1% saw any rise in income – including some who will benefit from higher incomes under JobKeeper than they would normally receive.

Costs of living continue to drive higher – despite the fall in oil prices – with many households incurring greater costs because they are spending more time at home. 94% said their costs were higher than a year ago.

Finally, household net worth was lower for 65% of households, reflecting stock market and property price adjustments, and rising debt levels. There was a drop of 11% in households claiming net worth had risen over the past year to 18%.

So we think the longer terms impacts on households are yet to be fully understood. Certainly, our data suggests households will be cautious, as income pressures, costs of living and rising debts bite. If home prices slide further as we expect they will, then household net worth will put a further brake on the wealth effect and will also adversely impact many households.  This does not suggest a V shaped recovery to me.