Experts warn of ‘debt bomb’ as housing downturn worsens - Queensland Property Investor
Connect with us

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

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Brisbane

City of Logan Emerges as Global Investment Hotspot

City of Logan Emerges as Global Investment Hotspot

The City of Logan is fast emerging as a global investment hotspot in south-east Queensland, buoyed by a strong economic track record, historic levels of infrastructure investment in the pipeline and business confidence on the rise.

Logan has continued to attract a number of multinational businesses and fast-growing start-ups looking to capitalise on the city’s growth potential and enviable location between Queensland’s capital, Brisbane and tourist destination the Gold Coast.

The launch of autonomous drone delivery services in Logan by Wing — a subsidiary of global technology company Alphabet — is just one of the businesses that have funnelled a total of $100 million of private investment into the city over the past 12 months.

Logan is just one of four locations in the world that now has access to Wing’s air delivery service, which flies a range of convenience items by air in just minutes.

Under the helm of chief executive James Ryan Burgess, Wing will focus their Queensland expansion plans in Logan first, with select households in the suburbs of Crestmead and Marsden already having access to the service.

Burgess said what made cities like Logan most attractive for investment was not only the demographic factors but the opportunities driven by growth.

“Logan is one of the fastest growing areas of Queensland, so that’s a great fit for us because drone delivery makes it much easier for people to get the things they need in rapidly expanding metropolises,” Burgess said.

“Logan is also a very innovative community, and the growth and excitement around the city makes it a great place for us to start our Queensland operations.”

Logan is located in the heart of south-east Queensland where around 70 per cent of the state live, and is predicted to be the second fastest growing city in this region.

In just over 20 years, Logan’s population is predicted to grow more than 50 per cent to around 548,000 residents.

This has led to an unprecedented level of infrastructure investment, with more than $18 billion of publicly funded projects under way to support the growing residential population.

 

 

Earlier this year, a $1.2 billion agreement — the largest of its type by any government in Australia, was signed by local authorities and private developers to build essential infrastructure in Logan’s Priority Development Areas Yarrabilba and Greater Flagstone.

This follows the completion of Transurban Queensland’s $512 million Logan Enhancement Project in August, which increased freight productivity by reducing road travel times along some of the busiest transport routes in the region.

Major infrastructure projects in the pipeline has triggered a surge in commercial activity along the Logan Motorway corridor, with large national and multinational businesses including Metcash Hardware, DHL, Queensland Logistics Service, Huhtamaki and Pinnacle Hardware setting up operations in Logan’s industrial precincts.

It’s not only the city’s efficient transport connections and affordable land driving this investment, Logan has advantages beyond its borders.

Within a 40 kilometre radius, Logan has access to a regional catchment of over 2.6 million people, a vast network of suppliers and a diverse pool of potential talent for employers to draw from.

GO1.com, the world’s largest on-boarding, compliance and professional development platform, recently relocated their headquarters from Brisbane to Logan to take advantage of this accessibility.

Co-founder Vu Tran said running a global company from Logan was a strategic decision for GO1.com and their future plans.

“Being in Logan has provided us with the opportunity and space we need to grow and also attract the talent that we need for our growing markets,” Tran said.

“Having businesses like Ikea, John Deere, Avery Dennison all based in the area means they are potential partners for us to engage with.”

City of Logan Emerges as Global Investment Hotspot 2

GO1.com has offices in the United States, South Africa, Vietnam, United Kingdom and Malaysia, and is on track for further expansion, recently securing more than $30 million of investment led by M12, Microsoft’s venture fund.

The increasing investment in Logan is reflected in the city’s economic report card – an annual 3.9 percent increase in the Gross Regional Product in the year ending 2017-2018 and the highest percentage of jobs growth in over fifteen years.

The arrival of businesses like GO1.com and Wing could mark the beginning of an exciting chapter in the city’s development.

For Wing, the city of Logan will be their largest investment in Australia to date and will play a role in shaping what the company will do in cities around the world.

“We’re really going to be investing here in Logan, learning as much as we can from the community and over time looking to apply that to other countries and cities that we may go to,” Burgess said.

“For now, it’s all our attention on Logan and making sure we offer a great service for the community.”

 

 

 

Source: theurbandeveloper.com

Continue Reading

Brisbane

Property investors bullish on the market

Property investors bullish on the market

Property investors are becoming increasingly bullish about the current market following a sustained period of recovery, a new survey has revealed.

According to the Property Investment Professionals of Australia’s (PIPA) national survey, 82 per cent of investors think it is now a good time to buy, up 5 per cent from 2018’s result.

PIPA chairman Peter Koulizos said “long-term capital growth beat out cash flow – both long- and short-term – as the most important aspect when choosing an investment”.

Where are investors buying?

While Brisbane is once again the preferred capital city for investment among respondents, there has been a dramatic rebound in Sydney’s appeal among investors.

Brisbane remains the hottest spot according to property investors, with 44 per cent of investors believing it offers the best investment prospects.

Melbourne has come in second, with 27 per cent of investors believing it to be the best place to buy.

For Sydney, just 14 per cent of investors see the harbourside city as offering up the best prospects.

The survey also found that strong regional growth has not swayed property investors; 73 per cent prefer metropolitan markets to regional locations.

Only 8 per cent of investors expressed the opinion that coastal locations are the most appealing place to buy, while investors previously scared by the mining collapse are cautious of mining towns, with just 1 per cent saying it the most appealing place to buy.

Breaking up with the big four

The survey also looked at the popularity of investment lenders, finding that the big four banks are losing popularity with this class of borrower.

It found that 27 per cent of investors are choosing to secure loans from a non-major bank lender.

According to the results, cheaper rates and increasing borrowing powers are the two main factors swaying investors from the big banks.

However, given the recent tightening of lending conditions, some investors are finding the property market difficult.

“Given tight lending conditions and the financial sector’s response to the banking royal commission, a staggering 25 per cent of respondents have found they were unable to refinance an amount they were able to borrow previously,” Mr Koulizos highlighted.

 

 

 

Source: www.nestegg.com.au

Continue Reading

Brisbane

Majority of property investors positive and think now is a good time to buy, industry survey finds

Majority of property investors positive and think now is a good time to buy, industry survey finds
Property investors are demonstrably more positive about real estate than a year ago, according to a new industry survey, despite having experienced the biggest price downturn in almost two decades.

With the nation’s property market’s recent recovery, a whopping 82 per cent of property investors believed that now was a good time to invest in residential property, the 2019 Property Investment Professionals of Australia Property Investor Sentiment Survey, released on Thursday, found. That figure was up from 77 per cent in 2018.

Three-quarters of investors surveyed did not vote for Labor in the May federal election because of the party’s proposed changes to negative gearing and capital gains tax.

“Labor lost the unlosable election,” the group’s chairman, Peter Koulizos, said. “Investors played a big role in who won in the last federal election. There was a lot of worry leading up to the election.

“The silver lining to property prices falling is you can buy undervalued property. But there was no silver lining to changes to capital gains tax and negative gearing.”

One-quarter of investors were now unable to refinance an amount they were able to borrow before the banking royal commission. Nearly 60 per cent of property investors are considering non-bank lenders after the royal commission, the survey of 1200 investors and conducted in September found.

Mr Koulizos said investors had turned to non-bank lenders due to the negative publicity about banks as well as tightened lending conditions.

“At the end of the day, most investors simply want to borrow the money, and if they have to pay half a per cent more, it’s just a cost of doing business,” Mr Koulizos said.

The survey found the two main concerns for property investors were access to credit and Australia’s economic conditions, and not falling house prices.

About 78 per cent of investors said they would not put their investment plans on hold because of falling house prices. But the number of investors who bought property in the past 12 months was down to 34 per cent from 43 per cent last year.

Brisbane remained the favoured city in which to buy an investment property, with 44 per cent of investors choosing it over Melbourne (27 per cent) and Sydney (14 per cent).

“One of the main reasons is because Sydneysiders can’t afford to buy property in their own city, so they look north to Brisbane where it’s about half price,” Mr Koulizos said.

“If you can find yourself an undervalued property in an undervalued market, that’s where you can make quick money.”

Brisbane is set for the biggest rise in house prices of any capital city over the next three years, according to a BIS Oxford Economics report.

An overwhelming 93 per cent of investors wanted greater professional standards for people handing out property investment advice.

But Mr Koulizos was quick to point out the property market was not returning to boom times anytime soon, and anyone who suggested otherwise was not telling the truth.

“Unfortunately, there are property spruikers that are giving false hope to people then they put the hard sell on them,” he said. “Generally, they’re selling off-the-plan apartments and new land and house packages.

“There is no boom on the horizon, and one of the telltale signs is if the Reserve Bank dropped interest rates again. It would be because the economy and the property market is not doing well.

“Otherwise, they would be thinking of raising interest rates.”

 

 

Source: www.domain.com.au

Continue Reading

Positive Cashflow Property

duplex designs, dual occupancy homes

Property Investment Advice

Trending