Category: Property Market

RBA Admits Around 175,000 Mortgaged Households Have A Cash Flow Problem!

Last week has turned out to be an important one in terms of household finances and mortgage rates. The RBA this week said households are generally weathering the record run of interest rate rises but one in twenty owner occupied mortgage holders are in a dire financial position because of the higher interest rates and cost-of-living increases.

On average, debt servicing costs have risen about 30-60% since the RBA started hiking its cash rate in May 2022. That said, less than 1% of all housing loans were 90 or more days in arrears, through loans with payments overdue for less than 90 days have “continued to tick up gradually” and are expected to continue to increase in part because of weak household consumption.

Despite the trajectory of interest rates, on-going strength in the labour market enables most people to keep up with rising debt repayment levels, the Reserve Bank said in its quarterly financial stability report. These challenges would intensify if economic conditions were to deteriorate by more than expected or if inflation is more persistent than forecast in the out of date RBA’s February Statement.

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The Aussie Housing Crisis Out To 2030 And Beyond? With Tarric Brooker…

Journalist Tarric Brooker and I deep dive on the Australian Housing Crisis, as conclude that there is no easy fix, thanks to generations of bad policy and active intervention. So who are the winners and losers?

Tarric slides are here if you want to follow along: https://avidcom.substack.com/p/dfa-chart-pack-22nd-march-2024

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Its Edwin’s Monday Evening Property Rant!

More coherence from our property insider as we continue to debunk some of the property myths, and focus in on the data.

This week, we touch on official and unofficial scams…

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Today’s post is brought to you by Ribbon Property Consultants.

Life Lessons From Mascot Towers Leaky Lifeboats!

Property owners from Sydney’s infamous, evacuated and faulty Mascot Towers development have until March 20th to react to the NSW government’s multi-tier approach to compensation.

The 132 residential and nine commercial owners of the inner-south apartment block have a chance to walk away from the legal and financial nightmare since the towers were evacuated in June 2019 due to structural cracking.

But owners will lose hundreds of thousands of thousands of dollars if they choose to sell their defect-riddled apartments.

There will also be two support packages available to both owner-occupiers and investors, as long as they meet the means-tested criteria.

But owner occupiers and property investors are in different lanes. And the approach tabled could also have ramifications for owners of apartments in other faulty buildings. This is significant, given that up to half of all new units built could have “serious” defects.

But it also shows how the NSW Government are separating property investors from owners, arguing that investors are taking a commercial risk, and potentially can offset losses from other investments.

Clearly there are no winners here, other than perhaps the original developers, but more broadly this is another warning to anyone considering buying into a high-rise development, either off the plan, or in a subsequent sale purchase. With limited Government capacity to solve the problem, many risk losing hard cash, remember Caveat Emptor, Let the Buyer Beware!

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Today’s post is brought to you by Ribbon Property Consultants.

Are You Feeling Wealthy?

The ABS says the total value of residential dwellings in Australia rose by $196.8 billion to $10,397.1 billion in the past quarter.

But these gross values are misleading because they are not equally distributed across all households. To illustrate this, I extracted current value data from my household surveys and created a distribution chart across all households, including both investment and owner-occupied holdings, based on a mark to market at end February 2024.

So we can see, standing back, that while some households will be feeling wealthy and celebrating the massive rise in home prices in recent years, many others are excluded, will be paying more for a rental, and will have very little or no financial assets at all.

So, it seems that Australia’s egalitarian roots have been sacrificed on the property population Ponzi. No wonder, those is charge do not want to rock the boat – the truth is there is a majority of potential voters benefiting from the property game. Its all a bit of a mess.

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Today’s post is brought to you by Ribbon Property Consultants.

Look No Home Loan! Another Market Distortion!

PEXA just released their second edition of their Cash Purchases Report which highlights residential property transactions that were funded entirely with cash. That is, residential properties purchased without a home loan. The share of mortgage-free transactions rose by 2.9 percentage points to 28.5 per cent of all home sales.

And this is important, because it helps to explain the apparent contradiction between the rise in property prices at a time when mortgage interest rates have also risen, a weird combination to say the least.

Some migrants, from the near 1 million arriving, come with sufficient cash to buy, as well as many downsizing Australians who have enjoyed the capital growth in recent years. So there is an ever larger portion of buyers that will be relatively unaffected by rising interest rates. This is another example of unequal access to housing, at the expense of mortgaged borrowers, especially in a higher interest rate environment.

Mortgage borrowers are being punished for the exuberance in demand for cash buyers. And more broadly, interest rates will remain higher for longer, because the interest rate lever is less powerful which gives the RBA and every Australian an inflation headache.

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Today’s post is brought to you by Ribbon Property Consultants.

DFA Live Q&A HD Replay: Household Financial Stress Analysis: Deep Dive

This is an edited version of my live discussion about the latest from our surveys, as we look at mortgage, rental, investor and financial stress across the country, down to a post code level.

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Its Edwin’s Monday Evening Property Rant!

Another chat with our property insider Edwin Almeida, as we look at the latest from the market. More supply questions, as construction costs rise, while some plan to offer zero deposit loans to attract voters.

Meantime the rental crisis deepens and opinion is divided in the WeeChat sphere.

The craziness continues…

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Today’s post is brought to you by Ribbon Property Consultants.

Mapping Mortgage Stress

A deep dive on mortgage stress, using our mapping tools, as we look across Australia to identify the areas with the highest stress counts – defined in cash flow terms.

This is ahead of my upcoming live stream on Tuesday 12th March, where we will look at specific post code level data. Mark your diaries…

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Operation Housing Mincemeat!

The desperate quest for housing is playing out across Australia, with renters fighting to find an affordable place, and being confronted with significant rent hikes, while others are trying to buy their way into the property market, despite tight lending conditions, and are fighting directly with some property investors who are still hoovering up more property as well as new migrants who are still arriving in their thousands. It’s a mess, and many are getting crusted in the process.

So, the latest data underscores the issue as the ABS released their lending indicators on Thursday, and they reported that for total housing new loan volumes fell 3.9% to $25.1b, after a fall of 4.1% in December. But it was still 8.5% higher compared to a year ago. Incomes of course are not growing at anything like that!

Within that, the total for owner-occupier housing fell 4.6% to $15.9b but was 3.4% higher compared to a year ago, while for investor housing new loans fell 2.6% to $9.2b but was 18.5% higher compared to a year ago.

The mortgage cliff, where cheap sub-2% loans were reset to much higher rates is coming towards the end of the road, although CBA also warned on Wednesday that debts servicing costs will continue to rise as the remaining cheap pandemic fixed rate mortgages reset to variable. And some of the cheapest fixes are yet to expire, according to my surveys. In addition, some cheap deals seem to have been extended on their original terms for some borrowers so the funding pressures will remain.

All up, the ABS said In January 2024 in seasonally adjusted terms, the value of external refinancing for total housing fell 5.0% to $16.1b and was 19.5% lower compared to a year ago, while for owner-occupier housing new loans fell 7.4% to $10.3b and was 24.3% lower compared to a year ago and for investor housing they fell fell 0.5% to $5.8b and was 9.1% lower compared to a year ago. One reason apart from the cliff problem is that lenders have reduced competitive cashback offers.

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Today’s post is brought to you by Ribbon Property Consultants.