Experts warn of ‘debt bomb’ as housing downturn worsens - Queensland Property Investor
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Opinion

Experts warn of ‘debt bomb’ as housing downturn worsens

debt bomb
AUSTRALIA is facing a “debt crisis” — and the property market and our entire economy are at risk as a result.

That’s according to the sobering 60 Minutes segment Bricks and Slaughter which aired last night, revealing the country’s property downturn was just the tip of the iceberg.

According to reporter Tom Steinfort, the current slump is actually “more like falling off a cliff”, with a number of real estate and finance experts claiming houses could plummet in value by up to 40 per cent in the next 12 months.

If that happens, it would also cause an economic “catastrophe”.

Mr Steinfort spoke with data scientist Martin North from Digital Finance Analytics, who said Australia was uniquely vulnerable when it came to an economic crash tied to a property downturn.

“At the worst end of the spectrum, if everything turns against us we could see property prices 40-45 per cent down from their peaks, which is a huge deal,” he said.

“There’s $1.7 trillion held by the banks in mortgages for owner-occupies and investors. And that’s about 65 per cent of their total lending.

“That’s higher than any other country in the Western world by a long way.

“There’s probably no country in the world more susceptible to the ramifications of a housing crash than Australia. We are uniquely exposed at the moment.”

Mr North said Australia was now in the same position as the US was back in 2006 and 2007 — a position which triggered an economic collapse.

“As a society, and as a government, and as a regulatory system, we’re all banking on the home price engine that just goes on giving and giving and giving. It’s not going to,” he said.

“We’ve got a debt bomb, we’ve got a debt crisis and at some point it’s going to explode in our face.”

debt bomb

Melbourne homeowner Mohammed Souid told 60 Minutes his family was experiencing mortgage stress. Picture: 60 MinutesSource:Supplied

It’s a sentiment shared by Laing and Simmons real estate agent Peter Younan, who said the median house price in his patch in Granville in Sydney’s west had dropped from $1.2 million to $1 million in just one year — a shocking $200,000 plummet.

He said foreclosures had also risen by 600 per cent in the region.

“The mortgage stress is definitely being felt especially in this area,” he said.

60 Minutes also spoke with several Aussie homeowners who gave harrowing details of the stress they faced trying to pay off their mortgages, including having their power turned off and being “hounded’ by their banks.

What does a million dollars buy in Aussie capital cities?

debt bomb

Market analyst Louis Christopher of SQM Research said the market had been “clearly overvalued”, labelling the downturn as the “correction we had to have” — at least in Sydney and Melbourne.

“On our numbers, Sydney was effectively over 40 per cent overvalued. And Melbourne was overvalued by about the same amount,” he said.

But property investor Bushy Martin said the blame lay squarely at the feet of buyers who “mortgaged themselves up to their eyeballs” in a bid to snap up dream homes before being able to afford them.

debt bomb

Property investor Bushy Martin says homeowners are to blame for the crisis. Picture: 60 MinutesSource:Supplied

However, the segment has also sparked backlash online, with some claiming the situation had been exaggerated.

One Reddit user branded the report as an example of “alarmist journalism and scare tactics”, while another said it was “dramatic and cringe-worthy”.

Others also criticised the segment for making it seem like all homeowners would be affected, when the downturn was actually mainly focused in the NSW and Victorian capitals.

And some said it was unfair to blame the banks for the situation, and that homeowners needed to take responsibility for their own decisions.

That was in response to comments made by one homeowner on the program, who said the bank had “suddenly switched the mortgage to interest and principal”, raising his repayments by 57 per cent.

“The interest only part annoyed me the most. The bank didn’t ‘suddenly change’ your repayment from (interest only) to (Principal and interest) your IO term expired. You a) knew this would happen and b) assumed the bank would renew it when it expired. I hope this speculator gets burnt first,” one Reddit user said.

Source: news.com.au

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Brisbane

Brisbane and Melbourne retail markets are peaking: HTW Retail Clock

Brisbane and Melbourne retail markets are peaking HTW Retail Clock

Three of the eight capital cities are now at the top of the retail market, with Melbourne and Brisbane joining Canberra, according to valuation firm Herron Todd White’s (HTW) latest retail property clock.

The Central Coast, Gold Coast, Ipswich and Coffs Harbour also moved to the peak of market position.

Sydney remained at the approaching peak of market position this month, while Ballarat, Bendigo, Burnie-Devonport and Launceston are holding as rising markets.

Mackay joined Adelaide, among others, beginning their retail market recovery.

Brisbane and Melbourne retail markets are peaking HTW Retail Clock 1

Geelong and Illawarra remain at the start of their decline.

There’s not great news for Ballina, Newcastle, Lismore and Toowoomba, which are now declining markets, joining Echuca and Gippsland.

Hobart’s retail market is still nearing the bottom of the market, as is Gladstone, South West WA and now Rockhampton.

Alice Springs joined Perth, Darwin, Cairns, Townsville, Wide Bay, and Emerald at the bottom of the market.

 

 

Source: www.propertyobserver.com.au

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Brisbane

Brisbane seller market expectations highest since beginning of 2018

Brisbane seller market expectations highest since beginning of 2018

Nearly 70 per cent of Brisbane home sellers are expecting property prices to increase within the next six months, according to new data.

A survey carried out on 3306 Australian vendors by OpenAgent.com.au last quarter on their expectations for price movement for Brisbane property found respondents were the most optimistic they’ve been since the beginning of 2018, with 67 per cent believing prices would rise within the next six months.

At the end of 2018, 17 per cent of vendors believed Brisbane house prices would go down within the next six months; now, only 7 per cent believe prices are likely to drop over the next six months.

This is despite recent figures which showed Brisbane’s property prices had fallen again, making it one of only two capital cities in Australia to record house price declines over the quarter as well as the year.

The latest quarterly Domain House Price Report, released last week, showed house prices within the Brisbane LGA, where the median house price is $666,500, had fallen over the past year by 1.3 per cent.

Brisbane seller market expectations highest since beginning of 2018 1

However Carson Teh, data analyst from OpenAgent, said sellers remained optimistic about Brisbane prices.

“Though seller expectations in Sydney and Melbourne have now overtaken those in Brisbane, the optimism surrounding Brisbane’s property market has proven to be comparatively more stable over the past three years,” said Mr Teh.

“Home sellers in Brisbane have been expecting prices to be on the rise for at least three years, however, we haven’t seen confidence levels this high since the beginning of last year.”

He said the Brisbane property market had been performing well for many years.

“The Brisbane market hasn’t been as dramatically affected by the recent downturn in comparison to other capital cities such as Sydney and Melbourne,” said Mr Teh.

Brisbane seller market expectations highest since beginning of 2018 2

“Those looking to buy have a little time to make a move before dwelling values reach the next peak, however, those looking to sell could benefit from waiting for the market to bounce back even more,” said Mr Teh.

“Upsizers, in particular, should look to upgrade now before the gap between your current home and next home widens even more, whereas downsizers could do better off waiting for the market to improve.”

Compared to the previous quarter, the proportion of Brisbane home sellers that were expecting price increases has gone up by 28 per cent.

Another 26 per cent of Brisbane home sellers believed prices would stay about the same for the next six months.

Source: www.domain.com.au

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Opinion

Property investors should be considering the Sunshine Coast: Hotspotting’s Terry Ryder

Property investors should be considering the Sunshine Coast Hotspotting's Terry Ryder

EXPERT OBSERVER

I believe real estate markets are driven more by local factors than national ones. While many commentators are placing great significance on interest rate reductions as a prime driver of real estate markets, I’m much more interested in what’s going on the coalface of local economies.

And, in those terms, I put a high rating on the Sunshine Coast as a market that investors of all kinds should be considering. I regard the Sunshine Coast as the strongest market in Queensland at the moment and indeed one of the strongest in Australia.

I see events happening there as an economic revolution, which is shifting the Sunshine Coast from tourist destination to international city – a massive transition that’s happened in the past 2-3 years and continues to happen.

I recently completed a comprehensive 30-page report called The Sunshine Coast: Australia’s Most Compelling Growth Story, in which I note that the Sunshine Coast economy was no longer predominantly reliant on tourism because of the creation in recent years of strong health, education and technology industries – all part of an infrastructure program totalling more than $20 billion.

Economies reliant on tourism traditionally fail to deliver sustainable real estate growth. But the Sunshine Coast has diversified and strengthened and is now, I think, the nation’s most compelling growth story.

It has a $17.7 billion economy, making it one of the largest regional economies in Australia, and on infrastructure it’s outspending several of the nation’s capital cities.

The health, education and technology sectors – including the new $5 billion health precinct – are bringing new residents to the Sunshine Coast and this is providing strong impetus to the real estate market, notably at the Top End. The median house price for Noosa Heads has increased 40% in the past three years, while the median apartment price has jumped 25% in the past year.

In terms of becoming an international city, the Sunshine Coast will soon have an international airport and an international broadband network connection to Asia. Earlier this year the Sunshine Coast was named in the Top7 Intelligent Communities of 2019 by the global Intelligent Community Forum, alongside major international cities like Chicago.

Central to everything that’s happening in the region is the creation of a Sunshine Coast CBD from the ground up – a $5 billion enterprise which is now under way on a 53ha greenfield site in central Maroochydore.

The new city centre has attracted investment from local, national and international firms interested having an early presence in the growing region.

The Sunshine Coast is among the top 10 leading regions in the country for employment generation, adding more than 20,000 jobs over the past five years. The $1.8 billion Sunshine Coast University Hospital (SCUH) has created 5,000 jobs since opening in April 2017 and the new Maroochydore City Centre is forecast to provide 15,000 jobs over the lifespan of the 20-year project and inject $4.4 billion into the economy.

In addition, the Sunshine Coast International Broadband Network will deliver 800 new jobs once it’s operational next year and will deliver the fastest data connection to Asia from the east coast of Australia.

Part of the economic revolution of the Sunshine Coast in recent years has stemmed from the region’s growing reputation as an innovation and technology hub.

Demographer Bernard Salt has described the Sunshine Coast as “the entrepreneurship capital of Australia “because of the large number of knowledge-based start-ups and small businesses such as information technology, clean-tech, creative industries, aviation and education.

The population of the Sunshine Coast is forecast to reach 580,000 by 2041, an increase on the previous forecast of 558,000.

The Sunshine Coast is one of Australia’s fastest-developing economies, growing each year at rates well above national averages and is expected to expand to $33 billion by 2033.

As a consequence, our new Spring edition of The Price Predictor Index has found that the Sunshine Coast has more locations with rising sales activity than any other municipality in Australia. And that kind of outcome is likely to create sustainable long-term price growth.

 

 

 

Source: www.propertyobserver.com.au

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